If the demand curve is perfectly elastic, the burden of a tax on suppliers is borne:
A) entirely by the suppliers.
B) entirely by the consumers.
C) mostly by the suppliers and partly by the consumers if the supply curve is inelastic.
D) partly by the suppliers and mostly by the consumers if the supply curve is elastic.

Question

Quizplus · Accepted Answer

When the demand curve is perfectly elastic, consumers are very sensitive to price changes, so suppliers cannot pass any of the tax burden onto consumers. Therefore, suppliers bear the entire burden of the tax.

If the Demand Curve Is Perfectly Elastic, the Burden of a Tax