What effect do indirect taxes have on the supply of a product?

Indirect taxes, such as value-added tax (VAT) or sales tax, are imposed on goods and services, and their application typically results in an increase in the overall costs of production for manufacturers and sellers. When an indirect tax is levied, it effectively raises the price consumers pay for the product, which influences producers' willingness and ability to supply that product at previous price levels.

As a result, in the presence of indirect taxes, businesses may reduce the quantity they are willing to supply at any given price point because the additional cost associated with the tax decreases their profit margins. This can lead to a shift in the supply curve to the left, indicating a decrease in the quantity supplied at every price level. Thus, the imposition of an indirect tax leads to a fall in the quantity supplied in the market.