The graph shows the supply curve for a life-saving drug (i.e. the drug is essential). As such,
Question:
The graph shows the supply curve for a life-saving drug (i.e. the drug is essential). As such, the demand curve for this drug is perfectly inelastic. Now imagine the government imposes a tax on this drug. Use what you know about taxes and elasticity to correctly answer the following questions.
a -Suppliers will bear the entire tax burden, such that their post-tax take-home price will drop by an amount equal to the tax. The price consumers pay in the market will not change.
b- The tax burden will be split in some manner between consumers and producers, such that the new, post-tax consumer price is now higher and the new, post-tax producer take-home price is now lower.
c -Consumers will bear the entire tax burden, such that the market price they pay will increase by an amount equal to the tax. The post-tax take-home price for sellers will not change from the pre-tax price.
d - The tax burden will be split in some manner between consumers and producers, such that the new, post-tax consumer price is now lower and the new, post-tax producer take-home price is now higher.