How does tax system cause market failure?

      

How does tax system cause market failure?

  

Answers


Faith
Taxation leads to market failure since it increases the prices of taxed commodities thereby reducing the quantity demanded in the market. At equilibrium less is demanded, the tax prevents the interaction among buyers and sellers form automatically equating marginal social benefit and marginal social cost required to attain efficiency.
Faimus answered the question on February 25, 2019 at 18:57


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