How do taxes on goods that generate negative externalities impact the supply and demand curves in a market, and how do subsidies for goods that create positive externalities affect them?

Taxes on goods that create negative externalities, like pollution, make these goods more expensive. When the price goes up, fewer people want to buy them, which decreases demand, and producers may also supply less since they face higher costs. For example, if a factory has to pay a tax on its emissions, it might produce less to avoid paying more, shifting the supply curve to the left. On the other hand, subsidies for goods that create positive externalities, such as education or public transportation, lower the price for consumers and encourage more people to buy these goods. This increases demand and can lead to a rightward shift in the supply curve, as producers are incentivized to create more of these beneficial goods.