How does the imposition of an excise tax on a good affect its market equilibrium?

Due to imposition of an excise tax on good, both demand and supply gets reduced, and it drives market equilibrium to a price that is higher than those before tax. It also reduces the quantity of product after implication of tax. A subsidy shifts either the demand or supply, depending upon whether the buyer or seller receives the subsidy. If buyer receives the subsidy the demand curve shift leading to increase in quantity and equilibrium price. If seller receives subsidy the supply curve shifts and quantity increases while the equilibrium price decreases.

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Explanation: