When a tax is levied on a good, : 1.government collects revenues which might justify the loss in total welfare. 2.there is a dec
rease in the quantity of the good bought and sold in the market. 3.a wedge is placed between the price buyers pay and the price sellers effectively receive. 4.All of the above are correct.
A tax on good is a financial charge which is levied by the government upon a good or service. It is also called as sales tax.
Through the sales tax, the government collects revenues which helps in recovering loss in the total welfare expenditure.
A tax on good is a wedge between the price buyers pay and the price sellers effectively receive.
Also, sales tax increases the price of the good which ultimately decrease the quantity of the good bought and sold in the market as when price rise, demands fall.
