If demand for a product is perfectly inelastic, a tax of $1 per unit imposed on sellers will
A)not affect the market price of the product.
B)cause the market price to rise by $1 per unit.
C)cause the market price to decline by $1 per unit.
D)cause the market price to rise by less than $1 per unit.
E)none of the above

Question

Quizplus · Accepted Answer

When demand is perfectly inelastic, consumers are willing to pay any price for a product because they view it as a necessity or have no substitutes. Therefore, if a tax of $1 per unit is imposed on sellers, the entire tax burden will be passed on to consumers, causing the market price to rise by $1 per unit.

If Demand for a Product Is Perfectly Inelastic, a Tax