If a Pigovian tax is levied on consumers,the demand curve will shift:
A)straight down,decreasing quantity.
B)straight up,decreasing quantity.
C)straight down,increasing quantity.
D)straight up,increasing quantity.

Question

Quizplus · Accepted Answer

A Pigovian tax is typically levied on goods or services that create negative externalities, such as pollution or congestion. The purpose of the tax is to increase the cost to consumers of consuming these goods, so as to discourage their usage and reduce the associated negative externalities. When a Pigovian tax is levied on consumers, the cost of the good/services increases, which in turn leads to a decrease in demand. This means that the demand curve will shift downwards, resulting in a decrease in quantity demanded. Therefore, the correct answer is A.

If a Pigovian Tax Is Levied on Consumers,the Demand Curve