When we use the model of supply and demand to analyze a tax collected from the buyers, we shift the deman?

Question

true or false?

Answer 1

Actually, there are three different correct answers here. After the tax is imposed, all the buyers see is that their total costs are higher, even for the same amount, so they perceive a decrease in SUPPLY (supply moves left). The sellers perceive a situation in which, even if they charge the same amount but collect the tax for the government, now people are buying a smaller quantity, so they see a decrease in DEMAND (demand shifts left). A tax is a wedge between the price seen by the buyer and the one seen by the seller, so some argue that nothing shifts, we just have a supply price and a demand price, different by the amount of the tax. If you are in a PRINCIPLES course, almost everything is written from the seller's perspective, so I would shift the DEMAND.
By the way, a tax on suppliers, which works the same way, is usually treated as a cost increase, and that would reduce the supply (move the supply curve to the left).
Finally, whichever way you split it, a tax will almost always reduce the quantity that is actually bought and sold. The only exception you are likely to see is if demand or supply is PERFECTLY INELASTIC, so that the curve is drawn straight up and down, with no angle to it.

Answer 2

if the price goes up the demand goes down. and the consumer bears the burden of the tax if i remember correctly.

Answer 3

shift it to the left

true

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