Activity 1: Check for Understanding - Score Guide
- Taxes are required payments to government.
- Both consumers and producers are affected by taxes.
- When governments impose taxes, it raises the price of the good or service taxed (sales tax) and consumers aren't able to buy as much of the good at higher prices. When governments impose taxes, such as income tax, it reduces the amount of income consumers have to spend on goods and services and to save. As a result, they buy fewer goods and services and save less.
- When governments impose taxes, producers must charge more for their products to cover the tax. Consumers buy fewer goods and services at higher prices. Producers earn less revenue, and as a result, less profit.