ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -When there is an increase in unit tax on the production of goods by the government, the unit cost of production will rise and consequently, the firm would supply less than before at the given price. The supply would decrease implying that the supply curve would shift to the left.

Detailed explanation-2: -Such taxes affect supply because it adds to the cost of production. Reduction in per unit tax levied by the government will decrease the cost of production and increase supply by the firms due to higher profit margins. In this case the supply curve will shift towards the right.

Detailed explanation-3: -What effect does an increase in excise tax have on supply curve of product? The supply curve shifts to the left.

Detailed explanation-4: -As is the case with consumer surplus, producer surplus decreases in response to an excise tax on a good. This is due to the reduction in the quantity sold as the relative price of the good increases with an excise tax.

Detailed explanation-5: -When an ‘excise tax’ is imposed on buyers, this will cause the demand curve to shift. Explanation: When the ‘excise tax’ is imposed on the buyers then the ‘demand curve’ shifts down according to the ‘amount of the tax’.