📚 Learning Guide
Shifts in Supply Curve
hard

When the government imposes a tax on a product, this typically causes the supply curve to shift ______ due to increased production costs. Choose the best term to complete the statement.

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Learning Path
Learning Path

Question & Answer
1
Understand Question
2
Review Options
3
Learn Explanation
4
Explore Topic

Choose the Best Answer

A

outward

B

inward

C

horizontally

D

vertically

Understanding the Answer

Let's break down why this is correct

Answer

When a government tax is added to a product, producers have to pay more for each unit they make, so they are less willing to supply the same amount. This extra cost pushes the supply curve to the left, meaning the same price now brings a smaller quantity to the market. The leftward shift shows that at every price, the quantity supplied drops because the tax raises production costs. For example, if a factory that made 100 units before the tax can only produce 80 units after paying the tax, the supply curve has moved leftward. This shift reflects the higher cost of production caused by the tax.

Detailed Explanation

A tax raises the cost of making the product. Other options are incorrect because Some think a tax makes producers want to sell more, but it actually makes them less willing to supply; A horizontal shift would mean the same quantity is sold at a different price, which is not how taxes affect supply.

Key Concepts

Shifts in Supply Curve
Production Costs
Government Policies
Topic

Shifts in Supply Curve

Difficulty

hard level question

Cognitive Level

understand

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