Transcript SalestaxOct19

Effects of a Sales Tax
The effect of a sales tax collected
from sellers is to
A) Shift the demand curve up.
B) Shift the supply curve
down.
C) Shift the demand curve
down.
D) Shift the supply curve up.
E) Shift both the demand and
the supply curve.
The effect of a sales tax collected
from buyers is to
A)
B)
C)
D)
E)
Shift the demand curve up.
Shift the supply curve down.
Shift the demand curve down.
Shift the supply curve up.
Shift both the demand and the supply curve.
And on to our lecture…
If the demand curve slopes down
and the supply curve is vertical, a
sales tax collected from buyers
A) Not change the price paid to
sellers.
B) Will reduce price paid to sellers
by the amount of the tax.
C) Will reduce price paid to sellers
by less than amount of the tax.
D) Will increase price paid to sellers.
Vertical supply case
price
Pretax price
Demand curve shifts down
Post tax
quantity
If the supply curve is horizontal, a
$10 per unit tax collected from
sellers will increase the equilibrium
price paid by demanders
A) By $10.
B) By less than $10.
C) By more than $10.
Why is that?
$10
Supply curve with
tax
Supply curve
Without tax
The demand curve has slope –1 and the supply
curve has slope +2. A sales tax causes the after
tax price to buyers to rise by $10. The after tax
price received by sellers must have fallen
A)
B)
C)
D)
By $10
By $5
By $20
By $0
Why is that?
If slope of demand curve is -1
And price rises by 10, quantity
Falls by 10. If slope of the supply
Curve is 2, price received by
Suppliers must fall by 20.
Reminder: Midterm
Weds Oct 24
What will the quiz be like?
Multiple Choice and True False Questions.
If you haven’t studied
If you’ve studied