But it does not necessarily raise the price of bread by the full amount of
the tax. The increased price will reduce demand and to optimize profit the
bakers will absorb some of the increase.

The general observation that consumers pay all the taxes paid by their
suppliers is of course completely correct.

Strictly speaking, an increase in price will NOT reduce "demand," it
will decrease the *quantity* of bread purchased. Economics textbooks
define demand as a "schedule of the various quantities people buy at
various prices...."

The demand for some products is quite "inelastic," which means the
quantity does not vary much as the price changes. I would imagine
the demand for bread is fairly inelastic, so that the quantity would
not change very much if the price rise were small or moderate.

And aren't your two sentences contradictory? If bakers absorb some of
the tax, then consumers do not pay "all" the taxes paid by suppliers.

vince norris