Post #50413 by albaby1 on the US Policy board

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Quibble. If demand drops off enough for those carrots, the govt might also be worse off because whatever amount they got previously from sales of carrots could actually be more than with the addition of the 10cent carrot tax. Sort of like profit margin...if you sell X widgets at one price, and Y widgets at a lower price, there comes a break-even point, after which you're making more money selling Y widgets at the lower price.

The simplifying assumption (though unstated) in these types of hypotheticals is that your just looking at this one new tax in isolation. That you're ignoring for convenience the effect on state sales tax receipts, health impacts of diminished carrot production, environmental impacts of reduced carrot transport, and everything else.

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