The Effects of taxation and price controls on the economy

The effect of taxation and price controls on the economy range from the curtailment of the supply of goods to an increase in costs. When there is a tax impose on goods like tobacco or cigarette as described in the two articles, there is an increase in the price of the product, this shifts the supply curve of the product to the left, in other words, less quantity is available at the same prices, there is a decline in the quantity demanded and a new equilibrium between demand and supply is reached. On the other hand when price controls are imposed there is an artificial decline in the prices. At the lower prices, a higher quantity is demanded but the production is insufficient to fulfill that demand and so a shortage remain. There are stock outs. So in case of imposition of taxes as has been done in case of cigarettes, there is excess production capacity and the factors of production have to be diverted to other......

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Title: The Effects Of Taxation And Price Controls On The Economy
Approximate Word Count: 811
Approximate Pages: 4 (250 words per double-spaced page)

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