4 ms·

I don't understand your objection. The cost includes all tax.

• gruez 5y ago
  Suppose the following price breakdown for a pack of cigarettes: cost: $3 profit: $1 tax: $1 total price: $5 The government decides to increase the tax by $1, now it's cost: $3 profit: $1 tax: $2 total price: $6 As you can see, the total price went up $1, but the tobacco company's per-unit profit is the same. They can increase the price by more than the tax (eg. hiking the price by $1.5 rather than $1), but that's equivalent to hiking the price $0.5 without an associated tax increase, which they can do at any time.
  • random314 5y ago
    Let's say a competitor shows up who manufactures cigarettes at $1. At a lower tax rate of $1 his cigarette is $3 vs $5. But at a higher tax rate of $3, it is a $5 vs $7 customer price. In absolute terms the price difference is the same. However, consumers think in terms of percentages for cheaper items.
• kazinator 5y ago
  Any added margin that makes your product more expensive, that does not go into your pocket, is bad for business. It's basically a form of someone stealing from you. The user was willing to pay $4.50, all of which you could have had, but $0.50 went to a parasitic third party. We can look at it from the point of view of the transaction between the buyer and seller being arbitrarily robbed of $0.50. We can also look at it from the POV of the supply-demand curve: fewer units are sold of the more expensive product. Both these effects hit you: you're selling less because it's more expensive, without you getting any more of the extra per-unit revenue.