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

question 24

Multiple Choice

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

• A) raise the price by less than $1.
• B) raise the price by more than $1.
• C) raise the price by $1.
• D) lower the price by $1.

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Definitions:

Price Elasticity

Understanding the correlation between the price of a good and the demand it receives.

Strawberries

A soft, red fruit with a sweet flavor and a fragrant aroma, often consumed fresh or used in culinary preparations.

Price Elasticity

An indicator of the extent to which the demand for a product varies following a price adjustment.

Total Revenue

The total amount of money generated from the sale of goods or services before any costs are subtracted.