Question

The market for tennis shoes is in equilibrium. If the government increases business taxes, then we would expect to see a(n)

Answer 1

Decrease in supply

Step-by-step explanation:

When a government increases taxes it means that cost of production increases. Suppliers will have no choice but to increase prices at all levels of quantity demanded. This results in a decrease in supply because suppliers will not be able to maintain supply at all price levels.

Supply curve will shift to the left. Find attached an illustration.

If the market for tennis balls was in equilibrium an increase in taxes will result in decrease in ability of supplier to provide the good at all price levels so supply shifts to the left.