1) When there is a per unit tax on PRODUCERS, do youADD or SUBTRACT it from the

Question

1) When there is a per unit tax on PRODUCERS, do youADD or SUBTRACT it from the original price? 2) When there is a per unit tax on CONSUMERS, do youADD or SUBTRACT it from the original price? 3) When there is a per unit subsidy on PRODUCERS, doyou ADD or SUBTRACT it from the original price? 4) When there is a per unit subsidy on CONSUMERS, doyou ADD or SUBTRACT it from the original price? 1) When there is a per unit tax on PRODUCERS, do youADD or SUBTRACT it from the original price? 2) When there is a per unit tax on CONSUMERS, do youADD or SUBTRACT it from the original price? 3) When there is a per unit subsidy on PRODUCERS, doyou ADD or SUBTRACT it from the original price? 4) When there is a per unit subsidy on CONSUMERS, doyou ADD or SUBTRACT it from the original price?

Explanation / Answer

1) substract tax (t) from the price in the supply curve (i.e.substitute P-t for P:   D=f(P) --> S=f(P-t) ). This is because to supply the same quantity nowrequires the producers to receive a higher price (P+t) 2) substract from demand curve price 3) add to supply curve price 4) add to demand curve price

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