Question

Suppose that government officials in Arkansas decide to raise the tattoo tax (assume that the demand for tattoos is fairly elastic). If this tax is raised, we would expect the consumer surplus to:_________. A. increase. B. stay the same. C. decrease

Answer 1

Answer:

A. increase

Explanation:

Consumer surplus is the difference between the amount of money that consumers willing to pay for a certain goods/services. and the actual price of the goods/services.

When the government increases the tax of a certain product, the price of that product will most likely be increased since the sellers always  want to maintain the profit margin that they get from each sellers.

Increase in prices will lead to an increase in consumer surplus.