If the government removes an excise tax on producers, will their supply increase?
- Price of gasoline is $2 a gallon
- Producers are taxed at 50 cents per gallon by the government
- Weekly demand is 400 million gallons per week at 2 dollars a gallon
- Weekly supply is 300 million gallons per week at 2 dollars a gallon
In essence if a excise is removed from the producers, to make gasoline more affordable. Would their supply increase as they are paying less to produce a gallon of gasonline?