Suppose that government imposes a specific excise tax on product X of $6 per unit and that the price elasticity of supply of X is unitary (coefficient = 1). If the incidence of the tax is such that the producers of X pay $1.25 of the tax and the consumers pay $4.75, we can conclude that the

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The fact that consumers are paying a larger portion of the tax ($4.75 out of $6) indicates that the demand for product X is relatively inelastic. This means consumers are less sensitive to price changes and will continue to buy the product despite the tax, leading to a larger share of the tax burden falling on them.

Suppose That Government Imposes a Specific Excise Tax on Product