Question

Suppose there is currently a tax of $50 per ticket on airline tickets. Buyers of airline tickets are required to pay the tax to the government. If the tax is reduced from $50 per ticket to $30 per ticket, then the:_______
a. demand curve will shift upward by $20, and the effective price received by sellers will increase by $20.
b. demand curve will shift upward by $20, and the effective price received by sellers will increase by less than $20.
c. supply curve will shift downward by $20, and the price paid by buyers will decrease by $20.
d. supply curve will shift downward by $20, and the price paid by buyers will decrease by less than $20.

Answer 1

Answer:

C: Supply curve will shift downward by $20, and the price paid by buyers will decrease by $20.

Explanation:

If tax is imposed on the buyer, it will impact the amount of tickets demanded by the people and ultimately the supply of tickets. So, If tax is reduced by $20, demand for tickets and supply will increase because now buyers have to pay $20 less for every ticket they buy.