Question

If the government of India levies excise duty on sugar, in which direction will the supply of sugar shift?

Answer 1

If the Government of India levies an excise duty on sugar, the supply of sugar will shift to the left. Excise duty is a tax imposed on a specific good's production or sale. When an excise duty is levied on sugar, it increases the cost of production for sugar producers. As a result of the higher production costs, producers are less willing or able to supply the same quantity of sugar at the existing prices. A leftward shift of the supply curve represents this reduction in supply.