1. What is Tax Revenue Calculation?

Tax revenue calculation from a supply-demand graph determines the amount of revenue generated by a tax imposed on a good or service. It represents the area of the rectangle formed by the tax rate and the difference between pre-tax and post-tax quantities.

2. How Does the Calculator Work?

The calculator uses the tax revenue formula:

Where:

• \( \text{Tax Rate} \) — Amount of tax per unit (currency)
• \( Q_{\text{pre}} \) — Quantity sold before tax imposition (units)
• \( Q_{\text{post}} \) — Quantity sold after tax imposition (units)

Explanation: The formula calculates the total tax revenue collected by the government, which is represented by the rectangular area on the supply-demand graph between the pre-tax and post-tax equilibrium quantities.

3. Importance of Tax Revenue Calculation

Details: Calculating tax revenue is essential for government budgeting, economic analysis, and understanding the economic impact of taxation policies on market efficiency and consumer welfare.

4. Using the Calculator

Tips: Enter the tax rate per unit in currency, pre-tax quantity in units, and post-tax quantity in units. All values must be non-negative numbers.

5. Frequently Asked Questions (FAQ)

Q1: What factors affect tax revenue?
A: Tax revenue depends on the tax rate, price elasticity of demand and supply, and the market's initial equilibrium conditions.

Q2: Does higher tax rate always mean higher revenue?
A: No, according to the Laffer curve, beyond a certain point, higher tax rates can reduce the tax base (quantity sold) enough to decrease total revenue.

Q3: How is tax revenue represented graphically?
A: On a supply-demand graph, tax revenue is represented by the rectangle between the supply curves (or demand curves, depending on who pays the tax) at the pre-tax and post-tax quantities.

Q4: Who bears the tax burden?
A: The tax incidence depends on the relative elasticities of demand and supply. The more inelastic side bears more of the tax burden.

Q5: Can tax revenue be negative?
A: No, tax revenue is always non-negative as it represents government income from taxation.