Government Intevention

Question 1

Effect of an indirect tax?

Answer 1

Increases the cost for producers

so the supply curve shifts to the left

Question 2

When will a government enforce an indirect tax and why?

Answer 2

negative externalities goods

As they negatively effect third parties, so increasing the costs of production reduces the supply and also generates revenue for the government which can be used to offset the effects of the consumption or production of that good