If a state introduces a new tax of 25% on the purchase of automobiles, what is the most likely effect on future automobile sales?

Select the best answer from the choices provided.

increased automobile sales

decreased automobile sales

unchanged automobile sales

varying automobiles sales

Decreased automobile sales.

The prices will increase which will cause less people to buy because they can't afford the new price. Taxes on products typically deter people from buying that product because the cost will go up to absorb the cost of the new tax to the supplier. A great example of this is the tax on cigarettes. As a means to get people to quit and make more money off of those buying, many states have put large taxes on cigarettes causing the price to double within a matter of a year or two after the tax went into place.