📚 Learning Guide
Tax Burden and Deadweight Loss
easy

How does a tax on a good typically affect consumer surplus?

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Learning Path
Learning Path

Question & Answer
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Understand Question
2
Review Options
3
Learn Explanation
4
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Choose the Best Answer

A

It increases consumer surplus

B

It decreases consumer surplus

C

It has no effect on consumer surplus

D

It only affects producer surplus

Understanding the Answer

Let's break down why this is correct

Answer

A tax on a good usually makes that good more expensive for consumers. When the price goes up due to the tax, some people might decide not to buy it or buy less of it. This decrease in purchases means that the overall benefit or "surplus" consumers get from buying the good also goes down. For example, if a popular snack increases in price because of a tax, some people may stop buying it, leading to less enjoyment from that snack and a loss of consumer surplus. Therefore, the tax reduces how much consumers benefit from the good they purchase.

Detailed Explanation

A tax on a good makes it more expensive for people to buy. Other options are incorrect because Some might think a tax helps consumers by improving services; It's a common mistake to think taxes don't change anything.

Key Concepts

Consumer surplus
Topic

Tax Burden and Deadweight Loss

Difficulty

easy level question

Cognitive Level

understand

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