Effect of an excise tax on a commodity


Question: Identify the fallacy in the following argument: "The effect of an excise tax on a commodity might seem at first sight to raise the price that buyer pay. But an increase in price will diminish the demand. And a reduced demand will send the price down again. It is uncertain, therefore, that the tax will really raise the price."

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Microeconomics: Effect of an excise tax on a commodity
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