Question

Help , am still confused

Answer 1

Option C. The price sellers received before the tax is imposed.

Explanation:

When the government imposes a tax on a commodity, the price of the commodity automatically increases. Depending on the size of the tax, the levels of taxes imposed vary. If throughout the size of the tax, the taxes are imposed on two different levels, there would be two different prices of the same commodity for two different quantities demanded. Let us assume that the initial price of the commodity before the imposition of the tax is P1 (as shown in the graph), and the increased prices after the imposition of the taxes are P2 and P3.

Thus, the price that the sellers would receive for the commodity before the government imposes any taxes would be P1. Once the taxes are imposed, the buyers would have to pay prices P2 and P3 depending on the size of the tax.