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  • Eco402 GDB 1 Idea Solution Spring 2019

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    Syed Abdul Mussaver Shah
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    The document discusses the impact of a health tax on producers and consumers. For producers, a health tax increases marginal costs, shifting the supply curve inward and reducing output from Q1 to Q2. For consumers, the tax raises prices and decreases demand by minimizing buying power, as consumers purchase less at the higher prices. The health tax affects both the supply and demand sides of the market.

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    ECO402 GDB 1 IDEA SOLUTION SPRING 2019 (1)

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    The document discusses the impact of a health tax on producers and consumers. For producers, a health tax increases marginal costs, shifting the supply curve inward and reducing output from Q1 to Q2. For consumers, the tax raises prices and decreases demand by minimizing buying power, as consumers purchase less at the higher prices. The health tax affects both the supply and demand sides of the market.

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    14 views2 pages

    Eco402 GDB 1 Idea Solution Spring 2019

    Uploaded by

    Syed Abdul Mussaver Shah
    The document discusses the impact of a health tax on producers and consumers. For producers, a health tax increases marginal costs, shifting the supply curve inward and reducing output from Q1 to Q2. For consumers, the tax raises prices and decreases demand by minimizing buying power, as consumers purchase less at the higher prices. The health tax affects both the supply and demand sides of the market.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    of 2

    MC190205134

    Impact of health tax on producer side

    When the government implement a tax on output of a firm/company it increase the marginal cost
    by the amount of tax in any firm/company. In return, the firm will reduce output to the point “t”
    at which the marginal cost + tax equals. So the sale tax shifts the supply curve inward.
    When the government implemented the health tax the output of the firm reduced to maintain as
    there is an effect on demand side too. The output level is reduced from Q1 to Q2 as shown in
    figure below:

    Impact of health tax on consumer side

    When the government implements the tax on goods, these taxes direct influence the consumer
    behavior. The immediate effect is the increased of price level of the goods increased due to
    which the demand for goods reduced because it minimize the buying power of the consumer so
    consumer buy less product with these prices as shown in figure below:

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