Taxes can really change the prices of things we buy and what we choose to purchase. Let’s make this idea clearer!

How Do Taxes Work?

When the government decides to put a tax on something, like a candy bar, it affects how much we have to pay.

For example, if a candy bar costs $1 and there’s a$0.20 tax, then it will cost us $1.20. Because of this extra cost, some people might decide not to buy as many candy bars.

Effect on Consumer Choices

When prices go up because of taxes, people look for cheaper options. If candy bars get too pricey, some might choose to buy something like fruit instead.

This change can make some snacks less popular and others more popular.

What Happens to Demand?

As prices go up:

• Demand Might Go Down: Fewer people will buy the candy bar, especially if they can get something else for less money.
• Substitutes Become More Popular: For example, if chips are cheaper than the now-expensive candy bar, more people might choose chips.

Illustration of Demand Shifts

Think about a simple graph that shows how many candy bars people want to buy. As the price goes up because of the tax, that line on the graph shifts to the left. This means that people want to buy less.

Conclusion

In the end, taxes help the government to influence how we spend our money, and they also affect how the market works.