Table of contents

0. Basic Principles of Economics1h 5m
1. Reading and Understanding Graphs59m
2. Introductory Economic Models1h 10m
3. The Market Forces of Supply and Demand2h 26m
4. Elasticity2h 26m
5. Consumer and Producer Surplus; Price Ceilings and Floors3h 45m
6. Introduction to Taxes and Subsidies1h 46m
7. Externalities1h 12m
8. The Types of Goods1h 13m
9. International Trade1h 16m
10. The Costs of Production2h 35m
11. Perfect Competition2h 23m
12. Monopoly2h 13m
13. Monopolistic Competition1h 9m
14. Oligopoly1h 26m
15. Markets for the Factors of Production1h 26m
16. Income Inequality and Poverty35m
17. Asymmetric Information, Voting, and Public Choice39m
18. Consumer Choice and Behavioral Economics1h 16m

6. Introduction to Taxes and Subsidies

Introducing Taxes and Tax Incidence

Microeconomics

6. Introduction to Taxes and Subsidies

Introducing Taxes and Tax Incidence

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Multiple Choice

If a tax is levied on the sellers of a product, the demand curve:

Shifts to the left in an amount equal to the tax

Shifts to the right in an amount equal to the tax

Does not change

Is inelastic

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Verified step by step guidance

Understand the concept of tax incidence: When a tax is levied on sellers, it affects the supply side of the market rather than the demand side.

Recall that the demand curve represents the relationship between the price of a good and the quantity demanded by consumers. A tax on sellers does not directly affect consumers' willingness to buy at different prices.

Recognize that a tax on sellers typically causes the supply curve to shift to the left, as it increases the cost of selling the product, leading to a decrease in supply at each price level.

Since the tax is on sellers, the demand curve remains unchanged because the consumers' preferences and income are not directly affected by the tax.

Conclude that the correct answer is that the demand curve does not change when a tax is levied on sellers, as the tax affects the supply side of the market.