Suppose the demand curve for a product is downward sloping and the supply curve is upward sloping.If a unit tax is imposed in the market for this product

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Quizplus · Accepted Answer

When a unit tax is imposed on a product in a market with a downward sloping demand curve and an upward sloping supply curve, the burden of the tax is shared by both buyers and sellers. The imposition of the tax causes the supply curve to shift upward, which leads to an increase in the equilibrium price paid by buyers and a decrease in the equilibrium quantity exchanged in the market. Buyers end up paying a higher price and, hence, bear part of the tax burden. However, the suppliers also receive a lower price, which reduces their willingness to supply and, thus, they bear the other part of the tax burden. Therefore, the tax burden is shared by both buyers and sellers in this scenario.

Suppose the Demand Curve for a Product Is Downward Sloping