Question

When a tax is placed on the buyers of cell phones, the size of the cell phone market

a. increases, but the effective price received by sellers decreases.
b. decreases, but the effective price received by sellers increases.
c. and the effective price received by sellers both increase.
d. and the effective price received by sellers both decrease?

Answer 1

When a tax is placed on the buyers of cell phones, the size of the cell phone market and the effective price received by sellers both decrease. When a tax is placed on the buyers of cell phones, the market doesn't really increase or decrease as those needing cell phones are still going to purchase and use them however the price that is received usually decreases because they aren't moving at a fast rate. It is likely that the amount of tax placed on them will have a say in how they increase or decrease within the market.