If a tax is placed on a good in a market where supply is perfectly inelastic, there is no deadweight loss and the sellers bear the entire burden of the tax.

Question

Quizplus · Accepted Answer

In a market with perfectly inelastic supply, producers are unable to change the quantity of the good they supply in response to a change in price caused by the tax. Therefore, the entire burden of the tax will be passed on to consumers in the form of a higher price, and there is no deadweight loss because the quantity supplied and demanded remains the same.

If a Tax Is Placed on a Good in a Market