The price elasticity of demand for a particular life-saving drug is zero, and the price elasticity of supply is 0.50. If a $10 tax is levied on producers, how much of this tax will eventually be paid by consumers?
A)$0
B)$7.50
C)$5.00
D)$10.00

Question

Quizplus · Accepted Answer

When the price elasticity of demand is zero, it means demand is perfectly inelastic, and consumers will bear the entire burden of the tax. Therefore, consumers will pay the full $10 tax.

The Price Elasticity of Demand for a Particular Life-Saving Drug