Why px-2 is done to to find equilbrium price while sales tax is collected from consumer why not px+2
Dear student,
Assuming that now the price is Px (which already includes the Rs 2 tax), then to find the new equilibrium price we will take Px - 2 because even though the consumers are paying a price which includes tax, however, sellers are only receiving Px - 2 as Rs 2 is going to the government. So, the supply function changes with price being Px - 2 and the demand function remains the same.
Assuming that now the price is Px (which already includes the Rs 2 tax), then to find the new equilibrium price we will take Px - 2 because even though the consumers are paying a price which includes tax, however, sellers are only receiving Px - 2 as Rs 2 is going to the government. So, the supply function changes with price being Px - 2 and the demand function remains the same.