Suppose the government imposes a $6 per month tax on cell phone usage. If the demand for cell phone usage is perfectly inelastic, and the supply curve is elastic (but not perfectly elastic), then the price of cell phone usage will:

Question

Quizplus · Accepted Answer

When demand is perfectly inelastic, consumers bear the full burden of the tax, so the price will increase by exactly the amount of the tax, which is $6.

Suppose the Government Imposes a $6 Per Month Tax on Cell