What effect does a tax on a good have on prices
A)It raises the price buyers pay and lowers the price sellers receive.
B)It raises both the price buyers pay and the price sellers receive.
C)It lowers both the price buyers pay and the price sellers receive.
D)It lowers the price buyers pay and raises the price sellers receive.

Question

Quizplus · Accepted Answer

When a tax is imposed on a good, the supply curve shifts vertically upwards by the amount of the tax. As a result, the equilibrium quantity decreases, and the equilibrium price increases. Buyers have to pay a higher price than before, while sellers receive a lower price than before, as part of the tax is paid to the government. Therefore, a tax on a good raises the price that buyers pay and lowers the price that sellers receive.

What Effect Does a Tax on a Good Have on Prices