Internet service tax

Internet service tax

Consider the $2-per-month tax on Internet access in Problem 6-9. Suppose that in the market for Internet access services provided to households, the market price increases by $2 per month after the unit excise tax is imposed. If the market supply curve slopes upward, what can you say about the shape of the market demand curve over the relevant ranges of prices and quantities? Who pays the excise tax in this market?
Problem 6-9
Suppose that the federal government imposes a unit excise tax of $2 per month on the monthly rates that Internet service providers charge for providing high-speed Internet access to households and businesses. Draw a diagram of normally shaped market demand and supply curves for Internet access services. Use this diagram to predict how the Internet service tax is likely to affect the market price and market quantity.

Internet service tax

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