Question

In: Economics

1 .If cigarettes are taxed and sellers of cigarettes are required to pay the tax to...

1 .If cigarettes are taxed and sellers of cigarettes are required to pay the tax to the government,

the demand for cigarettes decreases.
the price paid by buyers of cigarettes decreases.
the size of the cigarette market is reduced.

there is a movement downward and to the right along the demand curve for cigarettes.

2. If a tax is levied on the buyers of a good;

this means that the buyers of the good will pay a higher effective price for the good, not that they will send tax payments to the government.
this means that the buyers of the good will send tax payments to the government.
then the supply curve shifts upward by the amount of the tax.
then the quantity supplied decreases for all conceivable prices of the good.

Solutions

Expert Solution

Ans1) the correct option is there is a movement downward and to the right along the demand curve for cigarettes.

Ans2) The correct option is this means that the buyers of the good will pay a higher effective price for the good, not that they will send tax payments to the government.

Rahul Sunny answered 2 years ago
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