S E12: When Governments Intervene - Taxes, Price & Quantity Regulations
Think Like An Economist
What's the Difference Between the Market and the Tax?
When the government puts a tax on something, market forces take over. It's those market forces, rather than the government, that determines who'll actually end up paying more. So governments intervene, but the market sets the price and the new quantity of how much will be bought and sold. The ensuing soda glut will push the price of soda down.
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