When a tax is imposed on consumers, the demand curve shifts downward, so that the vertical distance between the original demand curve and the new demand curve that incorporates the tax equals the:
A)tax multiplied by the price elasticity of demand.
B)tax multiplied by the price elasticity of supply.
C)tax relative to the deadweight loss generated.
D)amount of the tax per unit.

Question

Quizplus · Accepted Answer

The vertical distance between the original demand curve and the new demand curve equals the amount of the tax per unit, as it represents the additional cost to consumers.

When a Tax Is Imposed on Consumers, the Demand Curve