Answer to Question #147602 in Macroeconomics for ALFRED BIGGIE

Question

If the supply curve is perfectly elastic and the demand is linear and downward sloping, what is the effect of a K1 specific tax collected from producers on equilibrium price and quantity? (explain with the aid of a diagram)

Answer 1

The tax on supply demand equilibrium shifts the quantity towards a point where the tax before demand and the tax before supply it the tax figure. A tax on sellers increases the fee of producing and promoting the precise reducing the volume provided at every price. The supply curve shifts to the left. The equilibrium fees rises and the equilibrium volume falls. Taxes lower the measurement of the market.