If the supply curve slopes upward and a $3 per unit tax on suppliers raises the profit-maximizing price by $3, demand must be perfectly inelastic.

Question

Quizplus · Accepted Answer

If the supply curve slopes upward, an increase in the price of the good will lead to an increase in the quantity supplied. If demand is perfectly inelastic, then the quantity demanded will not change in response to a change in price. Therefore, the entire burden of the tax will be borne by consumers, and the profit-maximizing price will increase by the full amount of the tax.

If the Supply Curve Slopes Upward and a $3 Per