Asked by Micah Jones on Apr 28, 2024



When a tax is imposed on sellers, producer surplus decreases but consumer surplus increases.

Producer Surplus

The difference between what producers are willing to accept for a good versus what they actually receive, often seen as a measure of producer welfare.

Consumer Surplus

The disparity between the cost consumers are prepared to pay for a good or service and the cost they actually encounter.

  • Apprehend the consequences of taxes on the harmony of market forces, particularly in relation to changes in consumer surplus, producer surplus, and government revenues.
  • Apprehend the variance in the economic consequences of taxation on consumers versus those on vendors.

Verified Answer

Ayesha Arakhan

May 01, 2024

Final Answer :
Explanation :
When a tax is imposed on sellers, both producer surplus and consumer surplus decrease because the tax creates a burden that typically leads to higher prices for consumers and lower effective revenue for producers, thus reducing the economic welfare of both parties.