A tax on a good a. raises the price that buyers effectively pay and raises the...

A tax on a good

a. raises the price that buyers effectively pay and raises the price that sellers effectively receive.

b. raises the price that buyers effectively pay and lowers the price that sellers effectively receive.

c. lowers the price that buyers effectively pay and lowers the price that sellers effectively receive.

d. has no effect of the effective price that buyers pay and sellers receive.

e. lowers the price that buyers effectively pay and raises the price the sellers effectively receive.

Solutions

Expert Solution

Option b

b. Raises the price that buyers effectively pay and lowers the price that sellers effectively receive.

A tax on the good shifts the supply or demand curve but the price paid by the buyer is higher than the price received by the seller by tax amount.

tax =price paid by buyer -price received by seller

old price < price paid by the buyer after tax

old price > price after tax recived by seller

Rahul Sunny answered 2 years ago

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