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Answer to Question #52344 in Microeconomics for lawrence
Question #52344
What is the effect of a $ 1 specific tax on equilibrium price and quantity if the demand is perfectly inelastic?
Expert's answer
If demand is perfectly inelastic, then the quantity demanded will be the same at any price, so there will be no effect of a $1 specific tax on equilibrium quantity, but equilibrium price will rise by $1 due to increase in taxes.
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