If supply is inelastic, the imposition of a tax will
A)fall more heavily on producers
B)fall more heavily on consumers
C)fall more heavily on profit making firms relative to non-profit firms
D)be equally distributed between buyers and sellers
E)change consumer expectations because they do not know what sellers will do

Question

Quizplus · Accepted Answer

If supply is inelastic, it means that producers are not able to adjust their output easily in response to a change in price. This means that if a tax is imposed, producers will not be able to pass on the burden of the tax to consumers by increasing the price of the product. As a result, they will have to bear the burden of the tax themselves, and the tax will fall more heavily on producers.

If Supply Is Inelastic, the Imposition of a Tax Will