Tax Incidence with Perfectly Inelastic Supply

Steps:

• Elasticity of supply zero means perfectly inelastic supply: quantity supplied fixed regardless of price.
• Tax incidence depends on relative elasticities: burden falls more on the less elastic side.
• With inelastic supply, suppliers cannot reduce quantity to shift burden, so they absorb the tax.
• Equilibrium price to consumers stays at original level; suppliers receive price minus full tax.

Why B is correct:

• Law of tax incidence: when supply elasticity is zero, suppliers bear 100% of the tax as they cannot adjust output.

Why the others are wrong:

• A: Consumers face no price increase, so they bear zero burden.
• C: Burden is entirely, not mainly, on suppliers; consumers unaffected.
• D: Burden is entirely, not just mainly, on suppliers.

Final answer: B