Suppose the supply curve and the demand curve both have unitary elasticity at all prices.The price increase to consumers resulting from a specific tax of $1 imposed on sellers will be
A) $1.
B) 50 cents.
C) zero.
D) impossible to calculate without knowing the slope of the supply curve.

Question

Quizplus · Accepted Answer

With unitary elasticity for both supply and demand, the tax burden is evenly split between consumers and producers. Thus, a $1 tax results in a 50-cent increase in price for consumers.

Suppose the Supply Curve and the Demand Curve Both Have