Explain the effect of the imposition of a unit tax on bananas on market price

Imposition of a unit tax on goods causes supply to decrease. The supply curve moves upwards by the value of the unit tax. This changes its intersection with the demand curve to a higher price and lower quantity. However, the price increase is lower than that of the unit tax, since quantity demanded normally reduces with price.This discrepancy increases with greater inelasticity of the demand curve, as inelasticity indicates an unwillingness or inability for the customer to accept a higher price; it also increases with greater elasticity of the supply curve, as this indicates higher revenues acquired from selling redundant factors of production.

BC
Answered by Bradley C. Economics tutor

2103 Views

See similar Economics IB tutors

Related Economics IB answers

All answers ▸

Evaluate the view that fiscal policy is the most effective way of achieving long-term economic growth


What is the definition of demand?


Evaluate the use of monetary policy to achieve macroeconomic objectives.


Analyse the impacts on the market if a subsidy was granted to cotton producers, and the discuss the consequences for stakeholders


We're here to help

contact us iconContact ustelephone icon+44 (0) 203 773 6020
Facebook logoInstagram logoLinkedIn logo

MyTutor is part of the IXL family of brands:

© 2026 by IXL Learning