A tax is imposed on chewing gum purchases. consumers end up paying all of the tax through a price increase while the producers pay none of the tax. this happened because the demand curve is perfectly inelastic.
Perfectly inelastic demand curve can be described as the curve that do shows the elasticity of demand and in this case the demand does not change with any change in price.
It shopuld be noted that the demand curve is usually a vertical curve straight line , however the Perfectly elastic demand can be seen as the occurrence which can be seen in economics where quantity that is demanded will shifft infinitely as a result of little change in the price of the product.
Therefore, the case whereby tax is imposed on chewing gum purchases and the consumer were the one that were paying the tax through a price increase exemplify the situation.
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