When the supply curve of labor is perfectly inelastic the burden of a social security tax is:
A)borne partly by the employers and partly by employees.
B)borne partly by the employers only if the demand for labor is elastic.
C)entirely borne by the employees.
D)entirely borne by the employers.

Question

Quizplus · Accepted Answer

When the supply curve of labor is perfectly inelastic, it means that regardless of the wage rate offered, the quantity of labor supplied will remain the same. In this case, the burden of a social security tax will be entirely borne by the employees as they cannot negotiate for higher wages to offset the tax. The employers, on the other hand, will not be affected as they do not have to pay any extra amount towards the tax. This is because the tax is a percentage of the wage earned by the employees and not a fixed cost for the employers.

When the Supply Curve of Labor Is Perfectly Inelastic the Burden