When a tax is placed on the sellers of a product, buyers pay

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When a tax is placed on the sellers of a product, it typically increases the cost of supplying the product. Sellers then pass on some or all of this tax burden to buyers in the form of higher prices. As a result, buyers pay more for the product. However, the sellers receive less for each unit sold than they did before the tax because the tax reduces their net earnings from each sale.

When a Tax Is Placed on the Sellers of a Product