Asked by elena ustimchuk on Jul 21, 2024
Verified
If the demand for a product is perfectly inelastic and supply is upsloping, a $1 excise tax per unit on suppliers will
A) raise price by $1.
B) not raise price at all.
C) raise price by more than $1.
D) raise price by less than $1.
Perfectly Inelastic
Describes a situation where the quantity demanded or supplied does not change despite changes in price.
Excise Tax
A tax imposed on the sale of specific goods and services, such as tobacco, alcohol, and gasoline.
- Learn the consequences of elasticity on the application of excise taxes.
Verified Answer
SR
shasha ruslanJul 22, 2024
Final Answer :
A
Explanation :
When demand is perfectly inelastic, consumers are willing to pay any price for the product. Therefore, suppliers can pass the entire $1 excise tax onto consumers, raising the price by $1.
Learning Objectives
- Learn the consequences of elasticity on the application of excise taxes.