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Terms in this group (20) Consumer surplus declines but producer surplus rises when a tax is placed on consumers.
The term "supply-side economics" refers to the theory that tax cuts would increase the amount of labor that was available and hence boost tax revenue. The supply curve is shifted by a tax paid by sellers, whereas the demand curve is shifted by a tax paid by buyers. Regardless of who pays the tax, the result is the same. 6.producer surplus When a good is taxed, the price consumers pay increases, the price sellers receive decreases, and the amount sold decreases. Similar to taxes on producers, consumer taxes will eventually lower amount sought and producer surplus. Due to the economic tax incidence, or who actually bears the cost in the new equilibrium, the tax, is based on how the market responds to the price change – not on legal incidence.
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