Figure 4-8 Figure 4-8 shows the market for beer. The government plans to impose a unit tax in this market.
-Refer to Figure 4-8.As a result of the tax,is there a loss in consumer surplus?

Question

Figure 4-8  Figure 4-8 shows the market for beer. The government plans to impose a unit tax in this market.
-Refer to Figure 4-8.As a result of the tax,is there a loss in consumer surplus?

Quizplus · Accepted Answer

When a unit tax is imposed on the market, the supply curve shifts upwards by the amount of the tax. This results in a new equilibrium with a higher price than before the tax and a lower quantity sold. Consumers end up paying a higher price than before, leading to a loss in consumer surplus. Therefore, there is a loss in consumer surplus after the tax is imposed.

Figure 4-8 Figure 4-8 Shows the Market for Beer