Question

What is the effect of a​ $1 specific tax collected from producers on equilibrium price and quantity if demand is perfectly elastic​?
Price:

a. increases by $1
b. unchanged

Quantity:

a. decreases
b. unchanged

Answer 1

Remember that a perfectly elastic demand is a demand where any price increase would cause the quantity demanded to fall to zero, and reducing the price of a good or service will not increase sales.

Also, equilibrium price is the market price where the quantity of goods supplied is equal to the quantity of goods demanded. This is the point at which the demand and supply curves in the market intersect.

Finally, equilibrium quantity is when supply equals demand for a product.

Therefore, the answer to this question is:

Price  is unchanged  and quantity  is unchanged

Answer:

Price:

b. unchanged

Quantity:

b. unchanged