Suppose that a $4 per unit tax is imposed on the sellers of DVDs. The effect of the tax will be to

Question

​Suppose that a $4 per unit tax is imposed on the sellers of DVDs. The effect of the tax will be to

Quizplus · Accepted Answer

A tax on the seller will shift the supply curve up by the amount of the tax (in this case, $4). This means that the equilibrium price paid by buyers will rise, but by less than $4 because the burden of the tax is shared between buyers and sellers. The new equilibrium price will be higher than the old equilibrium price, but the increase will not be as much as the tax.

​Suppose That a $4 Per Unit Tax Is Imposed on the Sellers

Suppose That a $4 Per Unit Tax Is Imposed on the Sellers