Final answer:
Consumers bear the full sales tax when either demand is perfectly inelastic, meaning they maintain the same buying quantity irrespective of price increases, or supply is perfectly inelastic, meaning producers can't adjust production in response to price changes. However, if good substitutes are available or both sides are equally elastic, the tax burden is shared differently. Option a and d both are correct.
Step-by-step explanation:
Consumers will pay all of a sales tax if supply is perfectly inelastic or demand is perfectly inelastic. This concept is rooted in the elasticity of demand and supply which measures how much quantity demanded or supplied responds to price changes. In the case where demand is perfectly inelastic, consumers will continue to buy the same amount regardless of a price increase due to a tax, bearing the full burden of the tax.
On the other side, if supply is perfectly inelastic, producers cannot adjust the quantity they produce in response to price changes, which usually means consumers will have to bear the tax as the market price adjusts upward. However, perfectly inelastic situations are rare in most markets. These concepts do not apply as neatly when consumers have good substitutes or supply & demand are equally elastic because in such cases the burden of taxation distributes more evenly or shifts according to the relative elasticity of demand and supply.