Asked by Lisdrey Cires on Jun 25, 2024
Verified
Suppose there is currently a tax of $100 per ticket on airline tickets. Sellers of airline tickets are required to pay the tax to the government. If the tax is reduced from $100 per ticket to $80 per ticket, then the
A) demand curve will shift upward by $20, and the price paid by buyers will decrease by less than $20.
B) demand curve will shift upward by $20, and the price paid by buyers will decrease by $20.
C) supply curve will shift downward by $20, and the effective price received by sellers will increase by less than $20.
D) supply curve will shift downward by $20, and the effective price received by sellers will increase by $20.
Supply Curve
A graph showing the relationship between the price of a good and the quantity of that good supplied.
Effective Price
The final price after accounting for rebates, discounts, or other financial adjustments.
- Elucidate the effects of taxation on market balance, cost, and amount.
- Understand the impact of taxation on supply, demand curves, and the balance of market conditions.
Verified Answer
AS
Agung Septa
Jun 29, 2024
Final Answer :
C
Explanation :
The reduction in tax decreases the cost of supplying airline tickets, which is represented by a downward shift in the supply curve. The effective price received by sellers increases, but due to the tax still being in place and the interaction between supply and demand, the increase is typically less than the full amount of the tax reduction.
Learning Objectives
- Elucidate the effects of taxation on market balance, cost, and amount.
- Understand the impact of taxation on supply, demand curves, and the balance of market conditions.