A tax is imposed on orange juice. Under what circumstance will consumers bear the full burden of this tax?
A) when the supply curve for orange juice is perfectly inelastic
B) when the price elasticity of demand for orange juice equals 1.4
C) when the demand for orange juice is perfectly elastic
D) when the demand for orange juice is unit elastic

Question

Quizplus · Accepted Answer

When the supply curve for orange juice is perfectly inelastic, it means that the quantity supplied will not change regardless of changes in price. In this case, the entire burden of the tax will be passed on to consumers in the form of higher prices, as producers are unable to adjust their quantity supplied.

A Tax Is Imposed on Orange Juice