What happens to price and who bears tax when markets have perfectly elastic supply or perfectly inelastic supply.
With perfectly inelastic supply, sellers maintain same price and supply but absorb the tax burden themselves. With perfectly elastic supply, buyers pay the tax and I believe price rises.
That’s perfect Reggie. I just wonder how to remember?
I think I remember seeing a questions like that on sample 2. I put the price rises on both but when its inelastic apparently the price stays the same and the sellers will just absorb the amount of tax.
draw a graph of supply and demand making the lines steeper/flatter depending on elasticity, put tax in and see who bears it
A good way to remember is the inelastic side always bears more of the tax.