How a tax Affects Welfare Tax reduces consumersurplus by (B+C)and producer surplus by (d+e) Price Tax revenue=(B+D) buvers A Supply a B… B Pric without P1 Deadweight LOSs =(C+E) tax D E Price P S·… sellers F ■■ receive ■ Demand 0 Q1 QuantityHow a Tax Affects Welfare... 0 Quantity Price Demand Supply Q1 A B C F D E Q2 Tax reduces consumer surplus by (B+C) and producer surplus by (D+E) Tax revenue = (B+D) Deadweight Loss = (C+E) Price buyers pay = PB P1 Price without tax = Price PS sellers receive =