When a tax is levied on buyers,the
A)supply curves shifts upward by the amount of the tax.
B)tax creates a wedge between the price buyers effectively pay and the price sellers receive.
C)tax has no effect on the well-being of sellers.
D)All of the above are correct.

Question

Quizplus · Accepted Answer

When a tax is levied on buyers, it creates a wedge between the price buyers effectively pay and the price sellers receive, which leads to a decrease in the quantity demanded and an increase in the quantity supplied. However, the supply curve does not shift upward since the tax is not imposed on sellers. Also, the well-being of sellers is affected as they receive a lower price after the tax is imposed.

When a Tax Is Levied on Buyers,the