Answer to Question #273295 in Microeconomics for Katie

Question

If the supply curve is perfectly inelastic and a per-unit tax is imposed on consumers, will

there be a deadweight loss to society? Why or why not?

Answer 1

For the manufacturer, the high elasticity of supply means, in particular, the ability to maneuver the conditions and results of its activities: to change the assortment, technology and volume of products. Consequently, this allows, adapting to market conditions, shifting a large share of the tax to the consumer. Conversely, producers with an inelastic, "inflexible" offer are unlikely to be able to shift the tax burden to consumers. It will not be an irrevocable loss to society.