In the United States, a buyer of a new electric car is eligible for a one-time federal income tax credit of up to $5,000. Show the effect of this tax credit graphically, assuming the $5,000 credit is a Pigouvian subsidy. Label the graph correctly and explain how this tax credit will affect each of the curves, equilibrium price, and quantity.

Answer rating: 100% (QA)

In this scenario we can represent the effect of the tax credit graphically in the context of supply ... View the full answer