As the tax is imposed then the supply curve shifts leftward with the same demand curve such that the price increases and output decrease in an economy. It reduces both consumer surplus and producer surplus and generates total revenue in an economy.

In the above diagram, as the supply curve shifts from SS to SS' then the consumer surplus reduces from ABC to AED and the producer surplus reduces from BCH to FGH. The total revenue is generated as the area EDGF. The deadweight loss is the area of DBG.

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