What effect does a 1$ specific tax have on equilibrium price and quantity, and what is the incidence consumer under following states:
1. The Demand curve is perfectly inelastic
2. The Demand curve is perfectly elastic
3. The supply curve is perfectly inelastic
4. The supply curve is perfectly elastic
5. The demand curve is perfectly elastic and supply curve is perfectly inelastic
6. Use graph and mathematics to explain your answer.
Answers
Answer:
1. The demand curve is perfectly inelastic, which means it it has a slope of 0. No matter what the price is (within reason), the consumer will still buy the product.
2. Perfectly Inelastic Demand: When demand is perfectly inelastic, quantity demanded for a good does not change in response to a change in price. Finally, demand is said to be perfectly elastic when the PED coefficient is equal to infinity. When demand is perfectly elastic, buyers will only buy at one price and no other.
3. While a perfectly inelastic supply is an extreme example, goods with limited supply of inputs are likely to feature highly inelastic supply curves. ... Perfectly inelastic supply means that quantity supplied remains the same when price increases or decreases. Sellers are completely unresponsive to changes in price.
4. If supply is perfectly elastic, it means that any change in price will result in an infinite amount of change in quantity. ... Perfect elastic demand means that quantity demanded will increase to infinity when the price decreases, and quantity demanded will decrease to zero when price increases.
5. Zero elasticity or perfect inelasticity, as depicted in Figure 2, refers to the extreme case in which a percentage change in price, no matter how large, results in zero change in quantity supplied or demanded. ... Perfectly inelastic supply means that quantity supplied remains the same when price increases or decreases.
6. In analytic geometry, graphs are used to map out functions of two variables on a Cartesian coordinate system, which is composed of a horizontal x-axis, or abscissa, and a vertical y-axis, or ordinate. Each axis is a real number line, and their intersection at the zero point of each is called the origin.