Figure 4-17
-Suppose that in Canada, the government places a $1,500 tax on the buyers of new snowmobiles. After the purchase of a new snowmobile, a buyer must pay the government $1,500. How would the imposition of the tax on buyers be illustrated in a graph?

Question

Figure 4-17 
-Suppose that in Canada, the government places a $1,500 tax on the buyers of new snowmobiles. After the purchase of a new snowmobile, a buyer must pay the government $1,500. How would the imposition of the tax on buyers be illustrated in a graph?

Quizplus · Accepted Answer

The tax on buyers increases the cost of purchasing a snowmobile, and thus reduces the quantity demanded at every price level. This means that the demand curve shifts to the left by the amount of the tax ($1,500). The supply curve is unaffected by the tax, as it represents the cost to the producer, which does not change with the imposition of the tax on buyers. Therefore, choice D is the correct answer.

Figure 4-17 -Suppose That in Canada, the Government Places a $1,500 Tax