Suppose the government imposes a $23 tax on the sale of running shoes by charging suppliers $23 for each sweater sold. If the demand curve is downward-sloping and the supply curve is upward-sloping:

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Quizplus · Accepted Answer

When a tax is imposed on a good, the supply curve shifts to the left by the amount of the tax. This means that the quantity of running shoes supplied will decrease, and the price of running shoes will increase. However, because the demand curve is downward-sloping, the increase in price will lead to a decrease in the quantity demanded. As a result, suppliers will not be able to fully pass on the tax to consumers, and the price of running shoes will increase by less than $23. Therefore, consumers and suppliers will share the burden of the tax.

Suppose the Government Imposes a $23 Tax on the Sale