Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
It increases consumer surplus.
B
It has no effect on consumer surplus.
C
It decreases consumer surplus.
D
It eliminates consumer surplus completely.
Understanding the Answer
Let's break down why this is correct
Answer
Taxation usually reduces consumer surplus in a market because it raises the price that consumers have to pay for goods or services. When the government imposes a tax, sellers often pass some of that cost onto buyers, making products more expensive. As a result, fewer people may choose to buy the product, leading to a decrease in the overall satisfaction or surplus that consumers gain from purchasing it. For example, if a tax raises the price of a popular snack from $2 to $2. 50, some consumers might decide not to buy it, which means they lose out on the enjoyment they would have had at the lower price.
Detailed Explanation
Taxation usually makes goods more expensive. Other options are incorrect because Some might think taxes help consumers by funding services; It's a common belief that taxes don't change anything.
Key Concepts
Consumer Surplus
Topic
Taxation and Deadweight Loss
Difficulty
easy level question
Cognitive Level
understand
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