A sales tax imposed on sellers of a good

Question

Quizplus · Accepted Answer

A sales tax imposed on sellers increases the cost of producing and selling a good, which reduces profit margins for sellers. Therefore, suppliers are less likely to produce as much quantity of the good, leading to a decrease in supply and a leftward shift of the supply curve. This results in an increase in the price of the good for buyers, which may reduce overall demand. However, the decrease in demand is typically less than the decrease in supply, so the net effect is a decrease in equilibrium quantity.

A Sales Tax Imposed on Sellers of a Good