Suppose that consumers have to pay a $50 tax on each smartphone they buy. How will...

Suppose that consumers have to pay a $50 tax on each smartphone they buy. How will this affect the market for smartphones?

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Expert Solution

If consumers have to pay the tax then this will decrease their willingness to pay and this decreases the demand for a smartphones. As a result the demand curve in the market for smartphones shifts to the left. The price paid by consumer increases and the price received by producer decreases as a result of tax. Quantity demanded and supplied also decrease this while government collects revenue from the tax. The sharing of tax of $50 will depend upon the elasticity of demand and supply.

Rahul Sunny answered 1 year ago

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