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In July 2018 the Australian government introduced a sales tax on all products bought online from overseas. The tax is 10% of the value of the product. This tax is collected from online sellers such as Amazon or eBay. Source: Hutchens, Gareth (2018). See link: https://www.theguardian.com/australia-news/2017/jun/19/gst-extended-to-all-goods-bought-overseas-from-july-2018
Consider the market for online products. The initial market equilibrium is at 10 million products sold per year at an average price of $500 each. Then, the Australian government imposes a tax on the market, collected from sellers (for example Amazon and eBay). The tax is 10% per item (each item has an average price of $500).
Show the effect of this on the market for online products. Show the effect on consumers of online products, on the online sellers, and on the government. Does the Australian economy gain or lose as a result of the tax? Explain why. Use a diagram to support your answer.
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