<p>Does anyone have a good website that explains the excise tax graph? I’m having a hard time with it for some reason. In the 5 steps book it says that a $1 tax was added to something and then it says the total price is only $1.80 and not $2. Anyone care to explain please?</p>
<p>I assume the equilibrium price before the tax was $1?</p>
<p>It’s been a while since I have taken economics and I have forgotten all of the economics lingo, but the idea is this: the $1 tax makes the product more expensive, which decreases demand. That in turn will push down prices, so the new equilibrium price after taxes is less than the old equilibrium price plus taxes.</p>
<p>You can google excise tax graph and get the reasoning step-by-step.</p>
<p>Alright that makes more sense, thanks a lot.</p>