If the government imposes a per-unit tax on good Y and the supply of good Y is perfectly inelastic,there will be no deadweight loss due to the tax.

Question

Quizplus · Accepted Answer

If supply is perfectly inelastic, it means that producers are unable to adjust the quantity supplied in response to a change in price. Therefore, regardless of the tax, the price of the good will remain the same and the burden of the tax will fall entirely on the consumers. Since there is no change in quantity demanded or supplied, there will be no deadweight loss.

If the Government Imposes a Per-Unit Tax on Good Y