If a Pigovian tax is levied on consumers,the demand curve will shift:
A) straight up, decreasing quantity.
B) straight down, decreasing quantity.
C) straight down, increasing quantity.
D) straight up, increasing quantity.

Question

Quizplus · Accepted Answer

A Pigovian tax is intended to correct a market failure by internalizing external costs. Levying a tax on consumers will make the good more expensive and reduce demand. Therefore, the demand curve will shift straight down, resulting in a decrease in quantity demanded.

If a Pigovian Tax Is Levied on Consumers,the Demand Curve