Final answer:
With perfectly inelastic demand and an upward-sloping supply curve, consumers will bear the entire burden of a tax (option a). This occurs because consumers will continue to buy the product regardless of price increases, indicating that sellers can pass the tax onto consumers without reducing the quantity sold.
Step-by-step explanation:
When analyzing the incidence of taxation and who bears the burden, understanding demand elasticity is crucial. In the case of perfectly inelastic demand and an upward-sloping supply curve, consumers do not respond to changes in price; they will buy the same quantity regardless of the price. Therefore, consumers will bear the entire burden of a tax in this situation (option a).
The key principle here is that the more inelastic the demand, the more consumers are willing to pay for the product without reducing their consumption, which allows sellers to pass the majority, if not all, of the tax burden onto consumers. Conversely, when demand is elastic, a higher price results in a larger drop in quantity demanded, making it harder for sellers to pass the tax burden onto consumers.
In conclusion, with perfectly inelastic demand and an upward-sloping supply curve, consumers have no alternative but to continue purchasing the product at a higher price, which implies that any tax levied on the product is absorbed by consumers, not producers.