A-LevelEconomicsGovernment microeconomic intervention9708/12 · Oct/Nov 2020 · Q91 Mark
A government reduces income tax but at the same time raises the rate of sales tax (VAT). What are the likely effects on the demand and supply of a normal good?
Ademand decreases, supply decreases
Bdemand decreases, supply increases
Cdemand increases, supply decreases
Ddemand increases, supply increases
✓ Correct answer
C: demand increases, supply decreases
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