A government decides to impose a per-unit tax on a highly inelastic good, such as insulin for diabetics. How would you classify the impact of this tax on consumer behavior and market dynamics compared to a similar tax on a highly elastic good, such as luxury watches?

When a government imposes a per-unit tax on a highly inelastic good like insulin, consumers will continue to buy it regardless of the price increase because they need it for their health. This means that the quantity demanded will not change much, and consumers will bear most of the tax burden. In contrast, if a similar tax is placed on a highly elastic good like luxury watches, consumers are likely to buy significantly fewer watches since they can easily decide not to purchase them or find alternatives. This difference happens because the demand for insulin is essential, while luxury watches are not necessities. For example, if the price of insulin rises due to the tax, diabetics will still purchase it, but if the price of luxury watches increases, many people might choose not to buy them at all.