The demand for medical care is very inelastic.If a 10 percent tax is levied on the sale of medical services and is collected from medical-care providers, then:

Question

Quizplus · Accepted Answer

Since the demand for medical care is very inelastic, it is difficult for consumers to significantly reduce their consumption of medical care, even if the price increases due to the tax. Therefore, most of the tax burden is likely to be passed on to consumers through higher prices for medical care. The incidence of the tax may also be shared between medical-care providers and consumers, but it is unlikely to be borne entirely by providers. The market equilibrium price of medical care may increase or stay the same, but it is unlikely to fall due to the tax. The excess burden of the tax may be high, but we cannot say for certain without more information.

The Demand for Medical Care Is Very Inelastic