Question
Within the supply-and-demand model, a tax collected from the sellers of a good shifts the a. supply curve upward by the size of the tax per unit b. demand curve downward by the size of the tax per unit c. supply curve downward by the size of the tax per unit d. demand curve upward by the size of the tax per unit
Ask by Gough Martinez. in the United States
Feb 03,2025
Real Tutor Solution
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Answer
When a tax is imposed on sellers, the supply curve shifts upward by the tax amount per unit.
Solution
Within the supply-and-demand framework, when a tax is imposed on the **sellers** of a good, it effectively increases their production costs by the amount of the tax per unit. This change is represented graphically by shifting the **supply curve upward** (or to the left) by the size of the tax per unit. This shift indicates that, at every price level, sellers are willing to supply less of the good because the tax reduces their profitability.
**Correct Answer:**
a. supply curve upward by the size of the tax per unit
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Simplify this solution Mind Expander
When a tax is collected from sellers, it leads to an increase in their costs, thus making them less willing to supply the same amount at existing prices. This results in a shift of the supply curve upward by the size of the tax per unit. The correct answer, therefore, is a. supply curve upward by the size of the tax per unit. In practice, this tax shift can lead to higher prices for consumers and lower prices received by sellers, which can affect market equilibrium. Sellers may decrease their supply, consumers may buy less due to higher prices, and the market will find a new equilibrium reflecting these changes in behavior.
