Why do taxes only shift the supply curve?

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liaente
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How come it doesn't affect the demand curve?
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MichaelWester
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(Original post by liaente)
How come it doesn't affect the demand curve?
Taxes affect the price of the good. The suppliers supply the good and therefore price it. As Tax affects the price, Taxes affect the Supply Curve.
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AdamCor
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The top post here https://www.quora.com/How-do-taxes-a...a-supply-curve explains it well. If I taxed bread then suppliers lose money, so they won't supply as much (as they would rather supply something else that gives more money).
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liaente
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thank youu, i guess i got confused because I was thinking of VAT, which may or may not make consumers spend less.
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liaente
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Yeah, we just probably need to know what they give us and not question it too much. I always over complicate things in economics :rofl: thanks for ur help once again xx
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Albdaeni
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(Original post by liaente)
How come it doesn't affect the demand curve?
Taxation certainly does impact the demand curve and anybody who says no is an idiot. Direct taxation often affects consumption and investment, this is income tax and corporation tax amongst others. This is because it effects how much profit business have left to invest, and the disposable incomes of individuals. Indirect taxes such as VAT, excise duties and many others impact the short-run aggregate supply curve not direct taxes. Direct taxes affect however, the Long-run aggregate supply curve, but, its effectiveness or the actual outcome is argued, this is referred to as supply-side fiscal policy. This is relating macroeconomics. It is still the same on a microeconomic level , if income tax rose, real income would fall therefore demand would too, if indirect tax rose, business cost will rise thereby a decrease in supply.
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Albdaeni
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(Original post by liaente)
How come it doesn't affect the demand curve?
Taxation certainly does impact the demand curve and anybody who says no is an idiot. Direct taxation often affects consumption and investment, this is income tax and corporation tax amongst others. This is because it effects how much profit business have left to invest, and the disposable incomes of individuals. Indirect taxes such as VAT, excise duties and many others impact the short-run aggregate supply curve not direct taxes. Direct taxes affect however, the Long-run aggregate supply curve, but, its effectiveness or the actual outcome is argued, this is referred to as supply-side fiscal policy.

(Original post by MichaelWester)
Taxes affect the price of the good. The suppliers supply the good and therefore price it. As Tax affects the price, Taxes affect the Supply Curve.
Do you even do economics bro? you sound extremely stupid
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Albdaeni
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(Original post by AdamCor)
The top post here https://www.quora.com/How-do-taxes-a...a-supply-curve explains it well. If I taxed bread then suppliers lose money, so they won't supply as much (as they would rather supply something else that gives more money).
This is only true for such taxes, aka indirect taxes. not all taxes.
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MichaelWester
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(Original post by Albdaeni)
Taxation certainly does impact the demand curve and anybody who says no is an idiot. Direct taxation often affects consumption and investment, this is income tax and corporation tax amongst others. This is because it effects how much profit business have left to invest, and the disposable incomes of individuals. Indirect taxes such as VAT, excise duties and many others impact the short-run aggregate supply curve not direct taxes. Direct taxes affect however, the Long-run aggregate supply curve, but, its effectiveness or the actual outcome is argued, this is referred to as supply-side fiscal policy.


Do you even do economics bro? you sound extremely stupid
Yes, I do - I tried to answer simply (not very well I'll admit though). Bit unnecessary that though!
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MichaelWester
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(Original post by Albdaeni)
Taxation certainly does impact the demand curve and anybody who says no is an idiot. Direct taxation often affects consumption and investment, this is income tax and corporation tax amongst others. This is because it effects how much profit business have left to invest, and the disposable incomes of individuals. Indirect taxes such as VAT, excise duties and many others impact the short-run aggregate supply curve not direct taxes. Direct taxes affect however, the Long-run aggregate supply curve, but, its effectiveness or the actual outcome is argued, this is referred to as supply-side fiscal policy.


Do you even do economics bro? you sound extremely stupid
Yes, I do - a bit unnecessary that?! The question you have raised is a fair one though, what type of taxation is the question referring to?
Last edited by MichaelWester; 2 years ago
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