<p>Let's say that without the tax, supply is given by <span class="math-container">$Q(P)$</span> or <span class="math-container">$P(Q)$</span>, while with the tax, it is <span class="math-container">$Q^t(P)$</span> or <span class="math-container">$P^t(Q)$</span>. Since the tax is a fixed amount per unit, producers don't care whether the market price is <span class="math-container">$P-t$</span> and there is no tax imposed, or the market price is <span class="math-container">$P$</span> and there is a tax of <span class="math-container">$t$</span>. Thus, <span class="math-container">$Q(P-t)=Q^t(P)$</span>. In terms of inverse supply, this means <span class="math-container">$P^t(Q)=P(Q)+t$</span>. Since price is on the vertical axis, this corresponds to an upwards <em>parallel shift</em> of the supply curve.</p>
<p>The confusion often arises because supply curves in introductory textbooks are usually depicted as linear. For linear supply curves, however, parallel left shifts cannot be distinguished visually (or by any other means) from parallel upwards shifts---they are indeed equivalent.</p>
<p>Another source of confusion is that some treat the term &quot;shift&quot; in a somewhat loose manner. If a shift is not necessarily meant to be a <em>parallel</em> shift, but rather just a dislocation which moves all points of a curve in the same direction by <em>some</em> amount, then an upwards shift and a left shift of a supply curve are actually the same thing (and the same holds for an upwards shift and a right shift of a demand curve).</p>
<p>Summarizing, depending on how you interpret the term &quot;shift&quot;, either both your textbook and your notes are correct, or your notes are wrong.</p>

CC BY-SA 4.0
2023-04-16T13:59:17.683Z
2023-04-16T13:59:17.683Z
VARulle
<p>My economics textbook says it shifts upwards but my school notes tell me it shifts leftwards. So which one is true? Or are they both true?</p>

CC BY-SA 4.0
2023-04-16T15:49:13.960Z
This answer might help: https://qr.ae/pG0F9y
Amit
<supply-and-demand><taxation>
When per unit indirect tax is imposed on a good does the supply curve shift left or does it shift upwards?
Patil
# When per unit indirect tax is imposed on a good does the supply curve shift left or does it shift upwards?

(Asked by: username_0 on 2023-04-16)

My economics textbook says it shifts upwards but my school notes tell me it shifts leftwards. So which one is true? Or are they both true?

**Tags:** supply-and-demand, taxation

> **Comments:**
> **username_1**: This answer might help: https://qr.ae/pG0F9y  

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## 1 answers

### Answer by username_2 on 2023-04-16. Score: 2 | Accepted answer

Let's say that without the tax, supply is given by $Q(P)$ or $P(Q)$, while with the tax, it is $Q^t(P)$ or $P^t(Q)$. Since the tax is a fixed amount per unit, producers don't care whether the market price is $P-t$ and there is no tax imposed, or the market price is $P$ and there is a tax of $t$. Thus, $Q(P-t)=Q^t(P)$. In terms of inverse supply, this means $P^t(Q)=P(Q)+t$. Since price is on the vertical axis, this corresponds to an upwards *parallel shift* of the supply curve.

The confusion often arises because supply curves in introductory textbooks are usually depicted as linear. For linear supply curves, however, parallel left shifts cannot be distinguished visually (or by any other means) from parallel upwards shifts---they are indeed equivalent.

Another source of confusion is that some treat the term "shift" in a somewhat loose manner. If a shift is not necessarily meant to be a *parallel* shift, but rather just a dislocation which moves all points of a curve in the same direction by *some* amount, then an upwards shift and a left shift of a supply curve are actually the same thing (and the same holds for an upwards shift and a right shift of a demand curve).

Summarizing, depending on how you interpret the term "shift", either both your textbook and your notes are correct, or your notes are wrong.


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