If the demand for a product is perfectly elastic, a tax of $1 per unit imposed on sellers will
A)increase the market price by $1 per unit.
B)increase the market price by less than $1 per unit.
C)decrease the market price by $1 per unit.
D)decrease the market price by less than $1 per unit.
E)not affect the market price.

Question

Quizplus · Accepted Answer

When demand is perfectly elastic, consumers are extremely sensitive to price changes and will not accept any price increase. Therefore, the entire burden of the tax falls on the sellers, leaving the market price unchanged.

If the Demand for a Product Is Perfectly Elastic, a Tax