We saw earlier that if supply is relatively inelastic, producers end up bearing most of the per-unit tax burden. The graph to the right shows the effect of a tax when supply is relatively inelastic on surplus, tax revenue and deadweight loss.

    When supply is relatively inelastic quantity sold drops by less, just as it did when demand was relatively inelastic. When supply is relatively inelastic the reduction in producers' surplus is very large, while the reduction in consumers' surplus is much smaller. Tax revenue is larger than when both supply and demand are relatively elastic and deadweight loss is smaller.

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