If a tax is levied 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

When supply is perfectly inelastic, the quantity supplied cannot respond to changes in price, so the seller is not able to shift the burden of the tax onto the buyer. As a result, the entire burden of the tax falls on the seller, and there is no deadweight loss because the quantity supplied and demanded will not change.

If a Tax Is Levied on a Good in a Market