If the government eliminates a tax on a good with a perfectly elastic supply,who benefits most?
A) buyers
B) sellers
C) buyers if the demand is also perfectly elastic, otherwise sellers
D) buyers if the demand is unit elastic, otherwise sellers
E) Buyers and sellers benefit equally.

Question

Quizplus · Accepted Answer

When the supply of a good is perfectly elastic, eliminating a tax on that good means that the entire benefit of the tax elimination is passed on to the buyers in the form of lower prices. Sellers receive the same price as before, so they do not benefit from the tax elimination.

If the Government Eliminates a Tax on a Good with a Perfectly