For a medical procedure which has a highly inelastic demand and an upward-sloping supply curve:
A)consumers will bear most of the burden of a tax.
B)consumers will not bear an insignificant portion of the burden of a tax.
C)consumers and producers will split the burden of a tax in half.
D)producers will not bear any of the burden of a tax.

Question

Quizplus · Accepted Answer

If the demand is highly inelastic, consumers will be willing to pay a high price for the medical procedure regardless of any added tax. As a result, the burden of the tax will fall on the consumers as they will continue to demand the same number of procedures irrespective of the price. On the other hand, suppliers may not be able to increase the supply of the medical procedure significantly as a response to the higher demand. Therefore, they will not have to bear an insignificant burden of the tax.

For a Medical Procedure Which Has a Highly Inelastic Demand