Figure 6-3
This figure shows the market demand and market supply curves for good Z.
-Refer to Figure 6-3.Suppose a tax of $6 per unit is imposed on this market.Which of the following is correct?

Question

Figure 6-3
This figure shows the market demand and market supply curves for good Z. 
-Refer to Figure 6-3.Suppose a tax of $6 per unit is imposed on this market.Which of the following is correct?

Quizplus · Accepted Answer

When a tax is imposed on the market, the supply curve shifts upward by the amount of the tax, from S0 to S1. The equilibrium quantity decreases from Q0 to Q1, and the equilibrium price paid by buyers increases from P0 to P1. The price received by sellers, however, decreases from P0 to (P1 minus the amount of the tax, which is $6 in this case). As a result, sellers bear more of the burden of the tax than buyers do. Therefore, choice C is correct.

Figure 6-3 This Figure Shows the Market Demand and Market Supply Curves