<p>If "supply is perfectly inelastic" it cannot be the case that the supplier can "just lower his production". The point of "perfectly inelastic supply", is exactly to represent the case, where the supplier will offer a specific quantity <em>at whatever price</em>, even zero.  The classic case here is a good that is it deteriorates quickly in terms of quality or even consumption safety (say fresh foods).</p>

<p>The equilibrium price is then determined by demand. If the state appears and wants to take a chunk out of the price by imposing a tax, the tax will fully burden the supplier.  </p>

<p>Of course this is the static approach. In a dynamic setting, such a situation may for example create incentives for an unofficial market, where the supplier tries to hide sales from the state in order to reduce the tax burden.</p>

CC BY-SA 3.0
2016-12-15T17:14:58.440Z
Hello, thanks for the detailed answer this is exactly what I couldn't understand, but is there a case where an inelastic offer can change ? Because here we are talking about tax so the supplier does not make the choice to change his supply but is there a situation where a supplier with an inelastic supply can decide to produce less or does an inelastic supply mean the supply is fixed no matter what?
Amr El Aswar
CC BY-SA 3.0
2016-12-15T18:21:01.287Z
@Amroelaswarn The latter. Perfectly inelastic supply means exactly that the supply is fixed no matter what.
Alecos Papadopoulos
CC BY-SA 3.0
2016-12-12T20:31:07.057Z
2016-12-12T20:31:07.057Z
Alecos Papadopoulos
<p>With perfectly inelastic demand, the consumer will pay the entire tax.  The supplier will not be adversely impacted at all.  He'll sell the same amount but at a price boosted by the amount of the tax.</p>

CC BY-SA 3.0
2016-12-12T18:56:01.150Z
Hello, yes but my question was for a perfectly inelastic offer not demand.
Amr El Aswar
CC BY-SA 3.0
2016-12-12T17:35:29.417Z
2016-12-12T17:35:29.417Z
Yogi
<p>I have a small problem, I have a situation where we have a perfectly inelastic offer and a normal demand, then there is a tax that is paid by the supplier who supports the totality of the charges ? Is it not the buyer ? Since the supplier can just lower his production ? I need some explanation om this thanks and sorry for my bad english.</p>

<microeconomics><elasticity><taxation>
Inelastic offer, tax paid by seller, who supports the charges
Amr El Aswar
# Inelastic offer, tax paid by seller, who supports the charges

(Asked by: username_0 on 2016-12-12)

I have a small problem, I have a situation where we have a perfectly inelastic offer and a normal demand, then there is a tax that is paid by the supplier who supports the totality of the charges ? Is it not the buyer ? Since the supplier can just lower his production ? I need some explanation om this thanks and sorry for my bad english.

**Tags:** microeconomics, elasticity, taxation


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## 2 answers

### Answer by username_1 on 2016-12-12. Score: 2 | Accepted answer

If "supply is perfectly inelastic" it cannot be the case that the supplier can "just lower his production". The point of "perfectly inelastic supply", is exactly to represent the case, where the supplier will offer a specific quantity *at whatever price*, even zero. The classic case here is a good that is it deteriorates quickly in terms of quality or even consumption safety (say fresh foods).

The equilibrium price is then determined by demand. If the state appears and wants to take a chunk out of the price by imposing a tax, the tax will fully burden the supplier.

Of course this is the static approach. In a dynamic setting, such a situation may for example create incentives for an unofficial market, where the supplier tries to hide sales from the state in order to reduce the tax burden.

> **Comments:**
> **username_0**: Hello, thanks for the detailed answer this is exactly what I couldn't understand, but is there a case where an inelastic offer can change ? Because here we are talking about tax so the supplier does not make the choice to change his supply but is there a situation where a supplier with an inelastic supply can decide to produce less or does an inelastic supply mean the supply is fixed no matter what?  
> **username_1**: @Amroelaswarn The latter. Perfectly inelastic supply means exactly that the supply is fixed no matter what.  

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### Answer by username_2 on 2016-12-12. Score: -1

With perfectly inelastic demand, the consumer will pay the entire tax. The supplier will not be adversely impacted at all. He'll sell the same amount but at a price boosted by the amount of the tax.

> **Comments:**
> **username_0**: Hello, yes but my question was for a perfectly inelastic offer not demand.  

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