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Week 4 Assignment - Taxes affect the overall equilibrium of...

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Taxes affect the overall equilibrium of price control. Both the price and demand of a good, service or product need to match in order to have price equilibrium. Price control is a requirement the federal government has assigned to charge for goods and services within a free market; this helps control any price gouging. There are two primary forms of price control. Price ceiling, the maximum amount that can be charged for the good or service. Price floor, the minimum price that can be charged. Taxes leave people free to choose how many to supply and consume as long as they pay the tax associated with the good or service. When there is a tax imposed on a good, service, or product there will be an increase in the amount charged. Over time cigarette prices have gradually increased. Mainly caused by an increase in the amount of taxes applied to them; not only by the federal government but by state governments. More recently the increase has become quite drastic. According to an article published by USA Today (Koch, 2009) the federal government imposed a new increase in taxes charged per pack. The consumption of tobacco is expected to decrease
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