(a)(True False) Suppose supply is perfectly inelastic and demand the de- mand elasticity equals 1. Then there is no deadweight loss in total surplus from a tax. Draw a graph to explain.

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ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter5: Elasticity
Section: Chapter Questions
Problem 30CTQ: In a market where the supply curve is perfectly inelastic how does an excise tax affect the price...
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(a) (True False) Suppose supply is perfectly inelastic and demand the de-
mand elasticity equals 1. Then there is no deadweight loss in total surplus
from a tax. Draw a graph to explain.
Transcribed Image Text:(a) (True False) Suppose supply is perfectly inelastic and demand the de- mand elasticity equals 1. Then there is no deadweight loss in total surplus from a tax. Draw a graph to explain.
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