If supply is perfectly elastic in a consumer goods market, a per unit tax will always be inefficient unless the market demand curve for consumers is perfectly inelastic.

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Quizplus · Accepted Answer

A per unit tax in a market with perfectly elastic supply does not necessarily lead to inefficiency unless the demand is perfectly inelastic. Efficiency loss (deadweight loss) occurs when the tax distorts the quantity traded away from the equilibrium. In a perfectly elastic supply, the supply curve is horizontal, indicating suppliers are willing to supply any quantity at a specific price. If demand is not perfectly inelastic (vertical), a per unit tax can still cause a deadweight loss by reducing the quantity demanded, as consumers respond to the effective price increase caused by the tax.

If Supply Is Perfectly Elastic in a Consumer Goods Market