3. What happens when an excise tax is paid mainly by consumers? 4. Describe what happens...

Question

Question

Answer 1

Answer #1

3.

When an excise tax is imposed on customers and is paid mainly by them, their demand for goods will fall and they will be less Willing to purchase those goods and services which will affect the equilibrium quantity and many of the goods will be left unsold.
Their willingness to pay for the goods they have purchased also falls.

4.

When an excise tax is paid mainly by the producers, both the price and equilibrium quantity gets affected.
Taxes Increase the marginal cost of production which makes it difficult for the firm's to increase their production.
This will decrease the quantity supplied by the producer's and to compensate the rise in costs of production, they increase their price's.

Answer 2

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