Asked by Yujing Huang on Jun 17, 2024
Verified
When a tax is imposed on buyers, consumer surplus decreases but producer surplus increases.
Consumer Surplus
The gap between the total price consumers are willing to pay for a good or service and the price they actually pay.
Producer Surplus
The difference between the amount producers are willing and able to supply a good for and the actual amount they receive (market price).
- Acknowledge the effects of taxation on the balance within the market, notably in terms of modifications in consumer surplus, producer surplus, and the monetary gains of the government.
- Understand the difference in the economic effects of taxes imposed on buyers versus sellers.
Verified Answer
SC
sherette chattooJun 22, 2024
Final Answer :
False
Explanation :
When a tax is imposed on buyers, both consumer surplus and producer surplus decrease because the tax creates a burden on both parties, reducing the overall quantity traded and thus the benefits each group derives from the market.
Learning Objectives
- Acknowledge the effects of taxation on the balance within the market, notably in terms of modifications in consumer surplus, producer surplus, and the monetary gains of the government.
- Understand the difference in the economic effects of taxes imposed on buyers versus sellers.