A tax on the buyers of cameras encourages Select one:
a. sellers to supply a larger quantity at every price.
b. buyers to demand a smaller quantity at every price.
c. buyers to demand a larger quantity at every price.
d. sellers to supply a smaller quantity at every price.
The correct answer and explanation is:
Correct Answer: b. buyers to demand a smaller quantity at every price.
Explanation (300 words):
When a tax is imposed on buyers of a good—in this case, cameras—the immediate effect is an increase in the effective price buyers must pay. Even though the price tag may remain the same, the tax increases the total cost to consumers. For example, if a camera costs \$100 and a \$10 tax is added, the buyer now effectively pays \$110. This increase in cost makes the camera less attractive to consumers, causing them to demand less.
This effect is described as a leftward shift in the demand curve. At every possible price level, buyers are now willing to buy less than before the tax. This is because their real purchasing power has declined with the added cost. The reduced quantity demanded at each price is a direct result of the tax burden falling on buyers.
It is important to note that this shift in demand happens regardless of whether sellers change their behavior or not. If the tax were instead placed on sellers, it would affect the supply side by raising their cost of doing business, and the supply curve would shift leftward instead.
Ultimately, the economic incidence (who actually bears the cost) of the tax may be shared between buyers and sellers depending on the elasticity (responsiveness) of demand and supply. However, the question is asking about the immediate behavioral change due to a tax directly imposed on buyers, which is that they demand a smaller quantity at every price.
So, the tax discourages consumption by making the product more expensive for buyers, leading to lower demand, not increased supply or demand, and not a change in seller behavior—making option b the correct answer.