Question

If demand is perfectly inelastic and supply is upward sloping, then a $1 tax per unit placed on producers will:

Answer 1

If demand is perfectly inelastic, this means that no matter how much the price of a good rises, demand will stay the same.

If supply is upward sloping, this means that the higher the price, the higher the supply, because the more revenue producers obtain.

However, in this case, the producers would raise the price of the good, by the amount of the tax: $1, and consumers would buy the same amount. However, the extra revenue from the higher price would go to the governmet in the form of tax revenue, and not to the producers.