This blog has been created to provide an area for economics students to read about how economics impacts daily life. It is especially useful for students to understand the application of macroeconomics as communicated through the media and governmental websites.

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Brief description: A tax on a good will shift the supply curve vertically upwards by the amount of the tax. Here that has led to an increase in price to P2 and a decrease in output to Q2.

Detailed description: An ad-valorem tax is a percentage tax on a good. This means that the supply curve will shift by varying amounts. At the lower end of the price range the amount of the tax will be less than at the higher end of the price range and so the supply curve shifts at an angle.