An excise tax will always cause consumer prices to increase. Explain.

Name: An excise tax will always cause consumer prices to increase. Explain.
Brand: Quizplus
Rating: 4.8 (55 reviews)

Question

Quizplus · Accepted Answer

If demand for the good in question is perfectly elastic, consumer prices will not increase at all. The price effect of the tax will be felt entirely by firms in the form of lower prices received for their goods. Only if demand is at least somewhat inelastic will consumer prices increase.

An Excise Tax Will Always Cause Consumer Prices to Increase