An excise tax of $1.00 per gallon of gasoline placed on the suppliers of gasoline in a market with downward sloping demand and upward sloping supply would raise the equilibrium price

Question

Quizplus · Accepted Answer

The tax will shift the supply curve upwards by $1.00, but the impact on the equilibrium price will be less than $1.00 per gallon since the demand curve is downward sloping. The exact amount of increase in price will depend on the relative elasticity of demand and supply.

An Excise Tax of $1