Imposing a tax on sales of a product

Question

Quizplus · Accepted Answer

Imposing a tax on sales of a product effectively increases the cost of producing or selling that product, which is reflected in the supply curve. The supply curve shifts left or upwards, indicating a decrease in supply at any given price, because the tax makes it more expensive for suppliers to offer the product. The demand curve remains unchanged because the preferences and income of consumers are not directly affected by the tax.

Imposing a Tax on Sales of a Product