price of good x increases because of increase on excise duty
explain chain effects on market eq.
increase in exise duty will lead to a leftwards shift In the ss curve.
this would in turn result in the creation of excess of demand at the original equilibrium Px
1) this excess of demand will result in competition amongst buyers and they will be ready to pay a higher price for the commodity offered
2) this increase in price will lead to an expansion in ss and contraction in dd as per the operations of law of ss and law of dd respectively.
3) this rise in price will continue till the excess of dd is wiped out and the new equilibrium will be established at a higher price and lower quantity
( do use the diagram along )
this would in turn result in the creation of excess of demand at the original equilibrium Px
1) this excess of demand will result in competition amongst buyers and they will be ready to pay a higher price for the commodity offered
2) this increase in price will lead to an expansion in ss and contraction in dd as per the operations of law of ss and law of dd respectively.
3) this rise in price will continue till the excess of dd is wiped out and the new equilibrium will be established at a higher price and lower quantity
( do use the diagram along )