When the tax is imposed, the demand curve shifts vertically downward by the tax per unit, t. This shift results in a new equilibrium
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3.13. Market Interference: The Negative Impact on Total Surplus ;
Originally, the pre-tax equilibrium is where D and S intersect at (P*, Q*). Consumer surplus is given by triangle a plus rectangle b plus triangle c, and producer surplus consists of triangle f plus rectangle d plus triangle e. <span>When the tax is imposed, the demand curve shifts vertically downward by the tax per unit, t. This shift results in a new equilibrium at the intersection of S and D′. That new equilibrium price is received by sellers (P rec’d ). However, buyers now must pay an additional t per unit to government, resulting in a total
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