# Tax wedge

Following from the Law of Supply and Demand, as the price to consumers increases, and the price from suppliers decreases, the quantity that each wishes to trade will decrease. After a tax is introduced, a new equilibrium is reached, where consumers pay more (P* → Pc), suppliers receive less (P* → Ps), and the quantity exchanged falls (Q* → Qt). The difference between ${\displaystyle Pc}$ and ${\displaystyle Ps}$ will be equivalent to the value of the tax.