Asked by Mohammad Ragheb on May 23, 2024
Verified
An increase in the excise tax on cigarettes raises the price of cigarettes by shifting the
A) demand curve for cigarettes rightward.
B) demand curve for cigarettes leftward.
C) supply curve for cigarettes rightward.
D) supply curve for cigarettes leftward.
Excise Tax
This is a tax levied on specific goods, services, or transactions, usually to discourage their use or generate revenue from specific sectors.
Supply Curve
A graphical representation showing the relationship between the price of a good and the quantity supplied.
Demand Curve
A graphical representation of the relationship between the price of a good and the quantity of that good that consumers are willing to purchase.
- Describe the concept of market equilibrium and understand how market forces lead to changes in prices and quantities.
- Pinpoint the reasons contributing to changes in the supply curve.
Verified Answer
GS
Gabriela SalomonMay 23, 2024
Final Answer :
D
Explanation :
An increase in the excise tax on cigarettes would increase the cost of production for cigarette sellers, therefore shifting the supply curve to the left. This results in a decrease in the quantity of cigarettes supplied at every price level, and thus an increase in the price of cigarettes. This would not affect the demand for cigarettes, as the demand curve remains the same.
Learning Objectives
- Describe the concept of market equilibrium and understand how market forces lead to changes in prices and quantities.
- Pinpoint the reasons contributing to changes in the supply curve.