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An imposition of tax on a good leads to
- a)Shift of the demand curve of the given good only
- b)Shift of the supply curve of the given good only
- c)Rightward shift of the supply curve of the given good only
- d)Movement of the demand and supply curves of the given good
Correct answer is option 'C'. Can you explain this answer?
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An imposition of tax on a good leads toa)Shift of the demand curve of ...
The imposition of either type of tax has an implication on the supply and demand framework. Specifically, it causes shifts in supply and demand, which in turn lead to new levels of quantity and prices in an economy.
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An imposition of tax on a good leads toa)Shift of the demand curve of ...
Explanation:
When a tax is imposed on a good, it affects the supply and demand for that particular good. Let's understand the impact of a tax on both the supply and demand curves:
1. Shift of the supply curve:
- A tax on a good increases the cost of production for suppliers. Therefore, suppliers are less willing to supply the good at the same price as before the tax.
- As a result, the supply curve shifts to the left, indicating a decrease in the quantity supplied at each price level.
- This shift occurs because suppliers are now willing to supply less of the good due to the additional tax burden.
2. Rightward shift of the supply curve:
- The statement is incorrect as the tax imposed on a good does not lead to a rightward shift of the supply curve.
- Instead, the supply curve shifts to the left, indicating a decrease in the quantity supplied.
3. Movement of the demand curve:
- The imposition of a tax does not directly affect the demand for a good.
- The demand curve shows the relationship between the price of a good and the quantity demanded by consumers.
- A tax does not alter the relationship between price and quantity demanded; it only affects the cost of production for suppliers.
4. Shift of the demand curve:
- The statement is incorrect as the tax imposed on a good does not lead to a shift of the demand curve.
- The demand curve shows the relationship between the price of a good and the quantity demanded by consumers, and a tax does not directly impact consumer behavior or preferences.
Therefore, the correct answer is option 'C' - a tax on a good leads to a leftward (or upward) shift of the supply curve only.
When a tax is imposed on a good, it affects the supply and demand for that particular good. Let's understand the impact of a tax on both the supply and demand curves:
1. Shift of the supply curve:
- A tax on a good increases the cost of production for suppliers. Therefore, suppliers are less willing to supply the good at the same price as before the tax.
- As a result, the supply curve shifts to the left, indicating a decrease in the quantity supplied at each price level.
- This shift occurs because suppliers are now willing to supply less of the good due to the additional tax burden.
2. Rightward shift of the supply curve:
- The statement is incorrect as the tax imposed on a good does not lead to a rightward shift of the supply curve.
- Instead, the supply curve shifts to the left, indicating a decrease in the quantity supplied.
3. Movement of the demand curve:
- The imposition of a tax does not directly affect the demand for a good.
- The demand curve shows the relationship between the price of a good and the quantity demanded by consumers.
- A tax does not alter the relationship between price and quantity demanded; it only affects the cost of production for suppliers.
4. Shift of the demand curve:
- The statement is incorrect as the tax imposed on a good does not lead to a shift of the demand curve.
- The demand curve shows the relationship between the price of a good and the quantity demanded by consumers, and a tax does not directly impact consumer behavior or preferences.
Therefore, the correct answer is option 'C' - a tax on a good leads to a leftward (or upward) shift of the supply curve only.
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An imposition of tax on a good leads toa)Shift of the demand curve of the given good onlyb)Shift of the supply curve of the given good onlyc)Rightward shift of the supply curve of the given good onlyd)Movement of the demand and supply curves of the given goodCorrect answer is option 'C'. Can you explain this answer?
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