Taxation

The effects of taxation and price control on the providence range from the curtailment of the supply of goods to the subjoin of costs. When in that location is a tax impose on goods like tobacco or cig artte as described in the two articles, there is an increase in the price of the growth, this shifts the supply curve of the product to the left, in other words less quantity is acquirable at the same prices, there is a decline in the quantity prerequisiteed and a new equilibrium between inquire and supply is reached. On the other hands when price controls are imposed there is an artificial decline in the prices. At the lower prices, a higher quantity is demanded but the drudgery is insufficient to fulfill that demand and so a shortfall remain. There are stock outs. So in courting of imposition of taxes as has been done in case of cigarettes, there is excess output signal capacity and the factors of production confirm to be diverted to other industries or sectors. Alternately, the production can be exported. The intended effect is that the incidence of smoking countenances reduced. The tax is levied on the consumers. This is the reason why the proposed tax of $1 go forth increase the price of a cigarette pack by $1. For administrative reasons the tax may be collected from the producers, however, this tax is clear on the consumers.

The tax will affect the demand for cigarettes. It has been shown by means of several empirical studies that imposition of taxes leads to a decrease in smoking. Those states that have imposed taxes have witnessed lower levels of smoking and those states that have not imposed steep taxes have witnessed lower levels of decrement in smoking. As smoking becomes more expensive, the number of cigarettes smoked falls. There is no direct effect on the supply, however, when the demand for cigarettes fall the supply will be reduced. Several factors of production that are employed in producing cigarettes will be unemployed. Employees will have to leave for other industries. Land and... If you want to get a full essay, order it on our website: Ordercustompaper.com

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