When alcohol is taxed and sellers of alcohol are required to pay the tax to the government,

Question

Quizplus · Accepted Answer

When alcohol is taxed, the sellers have to pay a higher price to the government, which raises their cost of production. This causes them to reduce their supply of alcohol, reducing the quantity of alcohol bought and sold in the market. As a result, the demand for alcohol remains the same or may even increase, but the quantity of alcohol consumed decreases, as shown by a movement along the demand curve to a lower quantity demanded at a higher price due to taxation. Therefore, the correct choice is A.

When Alcohol Is Taxed and Sellers of Alcohol Are Required