Question

If the government increased everyone's income tax rates to finance more generous benefits for seniors, the demand and supply model would predict a change in equilibrium price and quantity for some commodities because of:

a) Elasticity
b) Subsidies
c) Price floors
d) Taxes

Answer 1

The government increasing income tax rates to finance more generous benefits for seniors would result in changes in the equilibrium price and quantity of some commodities due to taxes.

Step-by-step explanation:

In this scenario, the correct answer would be d) Taxes.

When the government increases everyone's income tax rates to finance more generous benefits for seniors, it is imposing a tax on individuals. Taxes are a form of government intervention that can directly impact the demand and supply of commodities.

In the context of the demand and supply model, the tax on income reduces the disposable income of individuals, which affects their purchasing power. This leads to a decrease in demand for certain commodities.