The government places a tax on the purchase of socks. The following graph shows

Question

The government places a tax on the purchase of socks. The following graph shows the market for socks before the tax. Assume that neither the demand curve nor the supply curve is perfectly elastic or perfectly inelastic polygon (triangle symbol) to indicate the area that represents total spending by consumers before the government implements the tax Then use the purple polygon (diamond symbol) to shade the area representing total revenve for producers in the case Before Tax Demand Supply Total Spending by Consumers kProblernSetl temr/af/servlet/quiz ?quiz-action takeQu&q; 010

Explanation / Answer

As a result, the price received by the producer falls, and the total receipts for producers falls as long as supply curve is upward sloping.

a supply curve is upward sloping because as per the Law of Supply, other things being equal or ceteris Paribas the price of given commodity & quantity supplied for the commodity are directly related i.e., as the price increases the quantity supplied will also increase & vice-versa.

Taxation policy is one of the important determinant of law of supply because as tax imposed increases the price of the commodity also increases. And if there are subsidies then the price of the commodity will decrease.

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