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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?
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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.
- 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.
- 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.
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