How would the elimination of a sales tax affect the market for a product that had been subject to the tax?
A)The demand for the product would rise and the equilibrium price would fall by the amount of the tax.
B)The equilibrium price for the product would fall by less than the amount of the tax.
C)The reduction in government revenue from the tax would be made up by an increase in property taxes.
D)The supply of the product would become more elastic.

Question

Quizplus · Accepted Answer

The elimination of a sales tax would decrease the price consumers pay, but the equilibrium price would fall by less than the amount of the tax because the tax burden is typically shared between consumers and producers.

How Would the Elimination of a Sales Tax Affect the Market