A tax of $1 on buyers always decreases the equilibrium price by $1.

Question

Ahmad Karakhi · Accepted Answer

Final Answer : False, Explanation :  A tax on buyers shifts the demand curve downwards by the amount of the tax, but the new equilibrium price (paid by buyers) is determined by where this new demand curve intersects the supply curve. The decrease in equilibrium price is generally less than the tax amount, as the tax burden is shared between buyers and sellers depending on the elasticity of demand and supply.

A tax of $1 on buyers always decreases the equilibrium price by $1.

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