If a producer has to pay a Tax of ₹'c' per unit then the new demand function is
QD = a + b(P-c)
However if the tax is flat i.e ₹'d' tax has to be paid irrespective of the units produced (independent of production quantity) then how to show this change in the Demand Function?????
By flat Tax, I mean that the amount of Tax is fixed it does not vary with the Quantity Supplied/Demanded
Dear student
The standard demand and supply equations are based on the relationship of quantity demanded and quantity supplied respectively with the price of the commodity only while assuming that other things remain the same.
The impact of factors other than price is not depicted by the demand equation and supply equation.
The standard demand and supply equations are based on the relationship of quantity demanded and quantity supplied respectively with the price of the commodity only while assuming that other things remain the same.
The impact of factors other than price is not depicted by the demand equation and supply equation.