Effect of sales tax on economic surplus

This article attempts to discuss the effects of a sales tax on the social surplus. The reference point for studying these effects is a world without the sales tax, where the price is the market price and the quantity traded is the equilibrium quantity traded at that market price.

In a world without the sales tax, we have (assuming away external costs and external benefits):

social surplus in absence of sales tax = (producer surplus in absence of sales tax)+ (consumer surplus in absence of sales tax)

The introduction of the sales tax introduces a third party into the equation: the taxing authority, which we call the government.

social surplus in presence of sales tax = (producer surplus in presence of sales tax)+ (consumer surplus in presence of sales tax)

The goal is to ask the questions:

• How does the producer surplus in the presence of a sales tax compare with the producer surplus in the absence of a sales tax? If the values differ, what accounts for this difference? How much of this difference is captured by the government through tax, nd how much of it takes the form of deadweight loss?
• How does the consumer surplus in the presence of a sales tax compare with the consumer surplus in the absence of a sales tax? If the values differ, what accounts for this difference? How much of this difference is captured by the government through tax, nd how much of it takes the form of deadweight loss?
• How does the social surplus in the presence of a sales tax compare with the social surplus in the absence of a sales tax? If the values differ, what accounts for this difference? How much of this difference is captured by the government through tax, nd how much of it takes the form of deadweight loss?