Question

The market for tennis shoes is in equilibrium. If the government increases business taxes, then we would expect to see a(n) increase in supply. increase in quantity supplied. decrease in supply. decrease in quantity supplied. shortage in the market.

Answer 1

Answer:

The market for tennis shoes is in equilibrium. If the government increases business taxes, then we would expect to see a decrease in supply.

Explanation:

When a market is in equilibrium, a situation occurs in which the quantity demanded and the quantity supplied are the same, with which there is neither a surplus nor a shortage in supply and demand.

Now, in the event of an increase in taxes that would increase the cost of production and the final price of the product, the quantity supplied will tend to decrease, since a smaller quantity of products will be produced for the same amount. Likewise, the final price will tend to rise, with which demand will also fall, finding a new equilibrium point.