Suppose that the demand for picture frames is highly inelastic, and the supply of picture frames is highly elastic. A tax of $1 per frame levied on picture frames will increase the price paid by buyers of picture frames by

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Quizplus · Accepted Answer

When demand is highly inelastic and supply is highly elastic, the burden of a tax falls more heavily on consumers than on producers. This means consumers will bear most of the tax, leading to an increase in the price they pay by more than $0.50 but less than the full amount of the tax ($1).

Suppose That the Demand for Picture Frames Is Highly Inelastic