question archive In a market with an inelastic (vertical) supply curve, what is the effect of a $1

In a market with an inelastic (vertical) supply curve, what is the effect of a $1

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In a market with an inelastic (vertical) supply curve, what is the effect of a $1.00 per unit tax (paid by consumers)?

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The effect is that price rises by exactly $1 and the consumer pays nothing. Remember that the tax burden primarily falls on the party with the less elastic curve. In this case, producers have a perfectly inelastic supply curve and thus receive the entire tax burden.