wiz-icon
MyQuestionIcon
MyQuestionIcon
1
You visited us 1 times! Enjoying our articles? Unlock Full Access!
Question

Ordinary food items, such as grain, pulses, oil are used by all. Then why is it said that imposing a tax on them will have a greater effect on the poor?

Open in App
Solution

Explanation:
  • Explain the effect of taxes on prices of commodities.​
  • Then, explain the effect of rise in prices on the cost of living.​
  • Finally, explain how increase in cost of living impacts the poor.​
Solution:
  • Imposition of taxes leads to an increase in price of goods and services. When taxes are imposed on ordinary food items, it increases their prices as well.
  • Increase in prices leads to an increase in cost of living because now everything is more expensive.
  • The poor spend a major part of their income on buying such basic commodities. Thus, increased prices due to imposition of taxes negatively impacts their standard of living and pushes them further into poverty.

flag
Suggest Corrections
thumbs-up
0
Join BYJU'S Learning Program
similar_icon
Related Videos
thumbnail
lock
Summary
ECONOMICS
Watch in App
Join BYJU'S Learning Program
CrossIcon