Final answer:
A sales tax causes a movement along the demand curve due to an increased market price, reducing the quantity demanded, but does not shift the demand curve itself. It's the supply curve that shifts to the left, representing the increased cost of production due to the tax.
Step-by-step explanation:
In an economic model, a sales tax does not shift the demand curve itself. Rather, it causes a movement along the demand curve (option C) due to the change in the price of the good or service. A sales tax essentially increases the cost to the consumer, which is reflected in a higher market price, and as a result, the quantity demanded at each price level decreases. This is different than a shift in demand, which would imply a change in consumer preferences or income. In contrast to the direct effect on the demand curve, a sales tax will typically cause the supply curve to shift to the left because it reflects an increased cost of production to sellers who are required to collect the tax from consumers. When analyzing how taxes affect resource allocation, we can see that higher sales taxes tend to discourage consumption demand, leading consumers to buy less. This reduction in demand can lead to a reduction in production and possibly a reallocation of resources within the economy.