Tax Cuts in India

Correct! - For essential life-saving drugs, the quantity demanded remains constant regardless of price and demand is perfectly inelastic as long as the price is below buyers’ maximum willingness to pay. When these drugs become unaffordable, demand becomes perfectly elastic.

Well Done! - When the demand for life-saving drugs is perfectly inelastic, buyers bear the entire tax burden. When the tax is removed, buyers save the entire tax, so the price received by sellers and the quantity traded do not change.

That's Right! - The demand for and the supply of TVs are neither perfectly inelastic nor perfectly elastic so the tax burden is split between buyers and sellers. When the GST is lowered both buyers and sellers pay less tax.