Taxes and Subsidies
A sales tax on the commodity does not directly change the demand curve, if the price axis in the graph represents the price including tax. Similarly, a subsidy on the commodity does not directly change the demand curve, if the price axis in the graph represents the price after deduction of the subsidy.
If the price axis in the graph represents the price before addition of tax and/or subtraction of subsidy then the demand curve moves inward when a tax is introduced, and outward when a subsidy is introduced.
Read more about this topic: Demand Curve
Famous quotes containing the word taxes:
“I thought that’s what this war was about. Making people pay taxes when they didn’t have no say so about it.”
—Lamar Trotti (1898–1952)