Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Consumers will buy more luxury goods due to increased tax revenue.
B
Consumers will reduce their consumption of luxury goods as the total price rises.
C
Luxury goods will become more affordable as suppliers adjust prices.
D
Consumer behavior will remain unchanged regardless of sales tax.
Understanding the Answer
Let's break down why this is correct
Answer
When sales tax increases, it usually makes luxury goods more expensive for consumers. Since luxury goods are not necessities, people may decide to buy less of them or look for cheaper alternatives. For example, if a designer handbag that used to cost $1,000 now costs $1,080 after a tax increase, some shoppers might choose to wait for a sale or buy a less expensive brand instead. This change in behavior happens because consumers often weigh the cost against their desire for the item. As a result, higher sales taxes can lead to decreased demand for luxury goods in the market.
Detailed Explanation
When sales tax goes up, the total price of luxury goods rises. Other options are incorrect because Some might think that more tax money means more people will buy luxury items; It's a common belief that suppliers will lower prices to help sales.
Key Concepts
tax burden
sales tax
Topic
Tax Burden and Consumer Behavior
Difficulty
medium level question
Cognitive Level
understand
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