Question

What are three ways that taxes impact markets?

Answer 1

First = tax imposition on produer Decreases supply and causing equilibrium quantity to fall and EQUILIBRIUM price to rise.

Tax imposition on CONSUMER Decreases demand and causing equilibrium quantity to fall and EQUILIBRIUM price to fall.

First effect: Decreases market equilibrium or traded QUANTITY.

Second= Tax changes consumer surplus and produer surplus into tax revenue. Imposition of tax Decreases CONSUMER and producer surplus and convert that surplus into government tax revenue.

Third= Deadweight loss creation. Deadweight loss is loss of social surplus . Due to tax a small part of initial social surplus is lost .

mant Newsupply Casfertas supply (fistical → Deadweigh loss 2O2O