The government of Healthyland imposes a tax on sellers of salt. The tax is $0.10 per pound. With no tax, the price of salt is $0.40 per pound. The demand for salt is perfectly inelastic and the elasticity of supply is 1.5. With the tax, the price of salt paid by buyers in Healthyland is

Question

Quizplus · Accepted Answer

When demand is perfectly inelastic, buyers bear the full burden of the tax. Therefore, the price paid by buyers increases by the full amount of the tax, from $0.40 to $0.50 per pound.

The Government of Healthyland Imposes a Tax on Sellers of Salt