In general, a tax raises the price the buyers pay, lowers the price the sellers receive, and reduces the quantity sold.

Question

Quizplus · Accepted Answer

This is known as the incidence of tax, and it happens because taxes increase the cost of producing and selling a product, which is ultimately passed on to the buyers in the form of higher prices. The decreased profits for the sellers also make them less willing to supply as much of the product, resulting in a reduction in the quantity sold.

In General, a Tax Raises the Price the Buyers Pay