On Green Island, the demand for pencils is perfectly elastic and the supply of pencils is perfectly inelastic. If a sales tax on pencils is introduced,

Question

Quizplus · Accepted Answer

When the demand for pencils is perfectly elastic and the supply is perfectly inelastic, the sellers bear the entire burden of the tax because consumers have infinite alternatives and will not accept any price increase, while sellers cannot adjust their quantity supplied in response to the tax.

On Green Island, the Demand for Pencils Is Perfectly Elastic