Refer to the Above Supply and Demand Graph

question 35

Multiple Choice

Refer to the above supply and demand graph. S₁ and D₁ represent the current market supply and demand, respectively. S₂ and D₂ represent the socially optimal supply and demand. One way that the government could shift demand to its socially optimal level is to:

• A) Tax the sellers
• B) Tax the buyers
• C) Subsidize the sellers
• D) Subsidize the buyers