If the demand for a product is perfectly inelastic and the supply curve is upsloping, a $1 excise tax per unit of output will

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Quizplus · Accepted Answer

With perfectly inelastic demand, the quantity demanded does not change regardless of the price. As a result, the burden of the tax will be entirely on the consumers in the form of a $1 increase in the price. The supply curve is upsloping, which means that the price increase will lead to a higher quantity supplied, but it will not be enough to offset the tax burden on consumers. Therefore, the price will rise by exactly $1.

If the Demand for a Product Is Perfectly Inelastic and the Supply