Question

In response to the Coronavirus outbreak, the government has removed all taxes from the production of hand-sanitizer. At the same time, in an effort to protect themselves from the virus, people are using more hand santizer than ever before. Given these two effects, what can we say about the equilibrium price and quantity of hand sanitizer? a Equilibrium price will decrease the effect on quantity is ambiguous. b. Equilibrium price will increases the effect on quantity is ambiguous. c. Equilibrium quantity will decrease, equilibrium price will increase d. Equilibrium quantity will increase the effect on price is ambiguous. > Moving to another question will save this response Question 4 of 35 Close Window

Answer 1

Answer option D)

sinces taxes are removed on production, so supply curve shifts towards right

Similarly demand shifts to right

So Eqm Quantity will rise surely, but eqm price can rise or decrease, depending upon relative shifts of two curves

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