Taxation

Today, we will be discussing why the tax is levied on producers, consumers, or both, how the tax affects supply and demand, how the tax affects equilibrium price and quantity, and reasoning when a price ceiling or floor could be imposed. We will then talk about the implications it would possibly have on the market. So, let’s begin with the first question.
      The first question we will be discussing is, “Is the tax levied on the producers or consumers?” The answer is that the tax is levied on both the producers of the goods and the consumers who buy them. This creates assort of double tax situation. As read in a taxation article I found via the web, by an unknown author, the government has standardized the tax levy, this way the double taxation would occur which ends up maximizing the potential of the government’s financials.   Now just because the tax is levied directly on a business doesn’t mean the business will pay this full tax. Ultimately it will be paid by real people, not just consumers through steeper prices and business owners through reduced profits or reduced salaries. The main reason why governments levy taxes is so they can cover the costs of their expenses that need to be paid off. These Taxes do affect supply and demand in the following ways; producers pay these taxes, so it ultimately raises the cost of the final product, lessening the want for the product by consumers because some people might not be able to afford it and will choose to pick a similar alternative product at a lower price. For example: Say a consumer loves going to this little Italian place down the street, but the taxes raised on their products recently and for the business, so the business raised the price of most of the main courses on the menu. This consumer might decide to go to Hy-Vee and buy their own ingredients to make Italian dishes for their family because it will ultimately be cheaper for them. This is the affect taxes can have on both supply and demand....