Suppose the government imposes a $9 per month tax on cell phone service.If the demand curve for cell phone service is perfectly elastic and the supply curve is upward-sloping,the monthly price for cell phone service will:

Question

Quizplus · Accepted Answer

If the demand curve for cell phone service is perfectly elastic, it means that consumers are very responsive to price changes and any increase in price will result in a significant decrease in demand. 
On the other hand, if the supply curve is upward-sloping, it means that suppliers are willing to sell more at higher prices. 
When the government imposes a $9 per month tax, suppliers will have to pay the tax and as a result, will increase the price of cell phone service to cover their costs. 
However, since the demand curve is perfectly elastic, any increase in price will result in a complete loss of demand. 
Therefore, the suppliers cannot increase the price without losing all their customers. 
As a result, the price of cell phone service will not change, and consumers will continue to pay the same price as before the tax was imposed.

Suppose the Government Imposes a $9 Per Month Tax on Cell