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On the other hand when price controls are imposed there is an artificial decline in the prices. At the lower prices, a higher quantity is demanded but the production is insufficient to fulfill that demand and so a shortage remain. There are stock outs. So in case of imposition of taxes as has been done in case of cigarettes, there is excess production capacity and the factors of production have to be diverted to other industries or sectors. Alternately, the production can be exported. The intended effect is that the incidence of smoking gets reduced.
The tax is levied on the consumers. This is the reason the proposed tax of $1 will increase the price of a cigarette pack by $1...
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