How do taxes on goods with inelastic demand affect economic efficiency and externalities in a market?

When a government places taxes on goods that have inelastic demand, it means that people will continue to buy these goods even if the price increases. This is because these goods are often necessities, like medicine or basic food items, so consumers cannot easily reduce their consumption. While the tax can generate revenue for the government, it may lead to a situation where the market is less efficient because the higher prices can discourage some consumers from buying other goods they might enjoy. For example, if a tax is placed on insulin, people will still buy it, but they may have less money to spend on other things, which can affect other businesses. Additionally, if the tax is imposed to address negative externalities, like pollution, it might help reduce the harm caused by the good, but the overall economic impact can still be complicated.