Question

In three to four sentences, explain how taxes influence consumer decisions and buying power.

Answer 1

Factors such as price and production costs help determine the market supply curve.
Most states impose sales tax on some goods and services as a means of generating revenue. However, sales taxes also influence consumer behavior. These influences, along with the basic financial impact of sales tax, are evident on supply and demand curves when sales tax rates increase or a state imposes a new sales tax.

Answer 2

Taxes influence consumer decisions and buying power in the following ways:

• They affect spendable income of an individual.
• They affect the supply and hence the prices of the goods.
• They contrast the demand from the consumer end.

What are taxes?

Tax refers to a compulsory charge or levy imposed on an individual or business by the government.  Taxes are levied to fund government expenditures that are incurred for the welfare of the nation as a whole.

The types of taxes are production tax, consumption tax, wealth tax, income tax, and so on.

Taxes influence the consumer in the following ways:

More taxes on income means less income available in hands of the consumer and hence decreases his consumption.

When taxes on production increases, the producer will produce less and hence the market supply will get affected.

Lesser supply means high prices for the goods and less demand for the same. Consumer will contrast their demands.

Therefore, taxes affect the consumer behavior and buying powers in many ways.

Learn more about taxes here:

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