The U.S. government increases producer taxes on wine and consumer incomes
- Suppose that the U.S. government increases producer taxes on wine, and consumer incomes have risen at the same time. How would we expect that this will affect the supply curve and why? (The supply curve can remain static, the supply curve can shift to the left, we do not have enough information to say, or the supply curve will shift to the right)
- What would we expect to happen to the demand curve and why? (The demand curve can shift to the left, remain static, we don’t have enough information to say, or it will shift to the right)
- What collective effect will these change(s) have on the direction of the equilibrium price and quantity? (In some cases, it may not be possible for the information given to determine the direction of a particular price change or a particular quantity change. We will symbolize these cases as, “P?” and “Q?” The four possible combinations of price and quantity changes are: PI Q?, P? Q1, Pt Q?, P? Qt Remember to write your answers out without using these symbols.)