Asked by Tanisha Anderson on May 11, 2024
Verified
When a tax is imposed on buyers, consumer surplus and producer surplus both decrease.
Consumer Surplus
The dissimilarity in what consumers intend to pay for a good or service versus what they actually spend.
Producer Surplus
The disparity between the minimum amount sellers are ready to take for a product or service and the actual price they get in the market.
- Gain knowledge on the effect of taxation on the balance of market, specifically on consumer surplus, producer surplus, and the revenue of the government.
- Comprehend the disparity in economic impacts resulting from taxes levied on purchasers as opposed to sellers.
Verified Answer
JL
Jackie LevineMay 16, 2024
Final Answer :
True
Explanation :
When a tax is imposed on buyers, it effectively raises the price they have to pay, which reduces the quantity demanded. This leads to a decrease in consumer surplus because buyers are either paying more for the same amount of goods or buying less at higher prices. Producer surplus also decreases because the effective demand for their product is reduced, leading to lower sales or prices received by sellers.
Learning Objectives
- Gain knowledge on the effect of taxation on the balance of market, specifically on consumer surplus, producer surplus, and the revenue of the government.
- Comprehend the disparity in economic impacts resulting from taxes levied on purchasers as opposed to sellers.