The demand curve for pizza is downward sloping and the supply curve is upward sloping.If the government imposes a $2 tax on a pizza,________ the tax.
A) only consumers pay
B) only producers pay
C) both producers and consumers pay part of
D) neither producers nor consumers pay part of
E) the government pays

Question

Quizplus · Accepted Answer

When the government imposes a tax on a product, the supply curve shifts upward, leading to an increase in the price of the product. Since the demand curve is downward sloping, consumers will reduce their quantity demanded in response to the increase in price. Producers will also reduce their quantity supplied as they face higher costs due to the tax. Therefore, both producers and consumers pay part of the tax.

The Demand Curve for Pizza Is Downward Sloping and the Supply