Suppose the elasticity of demand for a product is 0 and elasticity of supply is 1.If the government imposes a tax on the product,then
A) buyers and sellers pay exactly the same share of the tax.
B) buyers pay all of the tax.
C) sellers pay all of the tax.
D) buyers pay a smaller share of the tax than do sellers, but both buyers and sellers pay some of the tax.
E) because the elasticity of demand is zero, the government collects no revenue from this tax.

Question

Quizplus · Accepted Answer

When the elasticity of demand is 0, it means demand is perfectly inelastic; consumers will buy the same amount regardless of price changes. With an elasticity of supply of 1 (unit elastic), suppliers can adjust their quantity supplied with changes in price, but in this case, because demand is perfectly inelastic, the entire tax burden falls on buyers as they will continue to purchase the same quantity despite any price increase.

Suppose the Elasticity of Demand for a Product Is 0