Taxes play a big role in how prices work in our economy. When the government adds a tax on things we buy, it increases the cost of making those things. This can lead to a few different situations:

1. Higher Prices:

   • Usually, sellers pass the tax cost onto customers. For example, if there’s a $2 tax on a product, the price might go up from$10 to $12.

2. Lower Demand:

   • When prices go up, fewer people want to buy that product. According to the law of demand, when prices rise, the number of buyers usually drops. For instance, if a price goes up by 20%, demand might fall by 10%.

3. Supply Changes:

   • Taxes can make producers less eager to sell their products. If a company earns less money because of a tax, they may decide to make fewer items.

4. Shift in Market Balance:

   • Taxes can change the balance of the market. Before the tax, the price might be $10, but after the tax, it could go up to$12. This change can lead to fewer items being sold.

In short, taxes make prices go up, reduce buyers' interest, and can change the balance in the market. This affects both people who buy things and those who sell them.