When demand for hats is perfectly inelastic, while the supply and the per-unit tax remain unchanged, the demand for hats is constant.
When the demand is perfectly inelastic, it implies that the consumer would be willing to a higher price for the same quantity of hats.
If demand is perfectly inelastic, then a change in price has no effect on the amount of the product that is desired. As a result, the supplier can set any price they like and consumers will continue to purchase the good. One example is healthcare.
Business owners use Perfectly Inelastic Demand to guide their pricing decisions. Each product has a distinct level of demand elasticity, therefore knowing whether a product's demand is elastic or inelastic can assist a company determine how much to raise or lower prices as needed.
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