Multiple Choice
If a tax is levied on the sellers of a product, the demand curve:
6. Introduction to Taxes
Introducing Taxes and Tax Incidence
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A tax was levied upon buyers of a good. What is the amount sellers receive after the tax is imposed?
A
19
B
25
C
29
D
None of the above
Verified step by step guidance1
Identify the initial equilibrium point where the original demand curve (D) intersects the supply curve (S). This is the point before the tax is imposed.
Observe the new demand curve (D + tax) which represents the demand after the tax is levied on buyers. The new equilibrium is where this curve intersects the supply curve (S).
Determine the price buyers pay after the tax by looking at the vertical position of the new equilibrium point on the D + tax curve.
Identify the price sellers receive after the tax by looking at the vertical position of the new equilibrium point on the original supply curve (S).
Compare the price sellers receive after the tax with the options provided (19, 25, 29, None of the above) to determine the correct answer.
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