A tax on sellers is a government imposed per unit tax of which sellers must pay the government out of their total sales revenue.
A tax on consumers is a government imposed per unit tax which consumers must pay the government in addition to the price of the good upon its purchase.
Inputs
If the market for a particular good can be represented by the supply and demand functions,
Qs = C + Dp and Qd = A – Bp
(see perfect competition, linear equilibrium for more information),
and you know what the unit tax imposed on the good being sold is, you can calculate and determine the effects on welfare that a per unit tax from the government has on both sellers and consumers. Suppose a unit tax of 5$ is imposed for each unit of bluetooth speaker sold of which the suppliers are responsible for.
For example if the market for bluetooth speakers is represented by the supply and demand functions,
Qs = 30000 + 100p and Qd = 370000 - 875p
and the unit tax on bluetooth speakers paid by the sellers is 5$, then the following would be inputted into the above calculator
A | 370000 |
B | 875 |
C | 30000 |
D | 100 |
Taxation Type | Tax On Sellers |
Unit Tax | 5 |
In inputting the above supply and demand curves and the type and amount of the taxation for the good we get the following results for the effects on welfare in the market,
CS: 2371618.76
PS: 20910673.82
SW: 23600035.30
DWL: 1121.79
G: 322115.38
Amount Consumers Pay w/ Tax: 349.23
Amount Sellers Receive w/ Tax: 344.23
Original Equilibrium, No Taxation: p* = 348.72, q* = 64871.79
As we see above a deadweight loss in social welfare is experienced of 1121.79 with the implementation of a 5$ unit tax on the sellers per bluetooth speaker sold. The idea of taxation is that this loss of welfare resulting from the implementation of a tax on a particular good, can be offset by the tax revenue the government gains assuming the funds are used for utilitarian and socially beneficial purposes.
References
Perloff, Jeffrey. Microeconomics. Boston, MA: Pearson Education, 2011. Print.