2018S161412108Page 1D6.420 12345 67 89.10 11 12QuantitySuppose that supply and demand at a market are represented by curves S and D atthe figure above (notice that the vertical axis grid has increments of $2) and then atax of $6 dollars per unit is imposed on buyers.Which curve shifts as a result?O Demand curve is shifting up by $6.Supply curve is shifting down by $6.Supply curve is shifting up by $6.Demand curve is shifting down by $6.Price

Answered: 20 18 S 16 14 12 10 8 Page 1 D 6 4 2 0…

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter4: Demand, Supply, And Market Equilibrium

Section: Chapter Questions

Problem 25P

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Quantity
Suppose that supply and demand at a market are represented by curves S and D at
the figure above (notice that the vertical axis grid has increments of $2) and then a
tax of $6 dollars per unit is imposed on buyers.
Which curve shifts as a result?
O Demand curve is shifting up by $6.
Supply curve is shifting down by $6.
Supply curve is shifting up by $6.
Demand curve is shifting down by $6.
Price

Expert Solution

Step 1

$6 per unit tax imposed on the buyers means that the buyers will pay $6 more than what the sellers will receive. So if sellers receive Ps and buyers pay Pb,

Pb=Ps+t

Now we see that Pb and Ps denote the inverse demand and inverse supply curves respectively. So, to find the new equilibrium, we have to move the supply curve up by $6.

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