Question

The difference between a tax and a subsidy is that when the government places a tax on a good, it _________ the equilibrium price and _________ the equilibrium quantity, whereas when the government places a subsidy on a good, it _________ the equilibrium price and _________ the equilibrium quantity.a. increases: decreases: decreases: increases b. increases: increases: decreases: decreases c. decreases: decreases: increases: increases d. decreases: increases: increases: decreases e. increases: does not change: does not change: increases.

Answer 1

Answer:

a. increases,decreases,decreases,increases

Explanation:

Because taxes would result in higher prices as taxes are added to the product prices which will discourage its quantity demanded , on the other side subsidy reduces the prices as some cost is borne by the government, so as we know that decline in prices encourages quantity demanded.