Let supply be given by P = 5Q and demand by P = 19 - 2Q. Suppose we now place a tax of 5 per unit of output on the seller. The new supply curve is:

Question

Quizplus · Accepted Answer

When a tax is placed on the seller, it effectively increases the cost of supplying each unit of output. The original supply equation is P = 5Q. With a tax of 5 per unit, the seller needs to receive 5 more per unit to supply the same quantity, making the new supply equation P = 5 + 5Q.

Let Supply Be Given by P = 5Q and Demand