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?

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 2 years ago

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