Taxiation Essay

1246 Words5 Pages


Taxation What extent of government regulation allows the citizens of the country the maximum amount of liberty? How much should the government intervene to protect the consumer? These are questions that every society must answer when developing their economic system. And for each question there are multiple answers. Some believe that little to no regulation is necessary, that the market place has natural laws of its own. Others disagree, saying that it is the government 's duty to protect the individual from the evils of the free market. Both solutions have definite attributes. The government intervenes the market to correct serious market failures. A market is defined as an organization that allows
…show more content…
The tax will affect the demand for cigarettes. It has been shown through 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 reduction 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 buildings that are involved in cigarette production and distribution will be reduced. For instance, the New York offices of Altria are being closed down and about 400 workers will be laid off. The increase in taxes will affect the equilibrium price and quantity. The price of cigarettes will go up initially by $1 if a tax of $1 is imposed. However, in reaction to the additional taxation and reduction in demand, cigarette companies will come up with some brands of cigarettes that cost less, the net effect on price will be that the final prices of the cigarettes will increase, but if low price introductions are taken into account the price increase will be lower than $1. In case of quantity, there will be a

More about Taxiation Essay

Get Access