The level of corporation tax will influence the market supply. For instance, high levels of corporation tax will reduce the relative profitability of growing coffee compared to other goods. As a consequence, a profit maximising producer will re-allocate their factors of production to non-coffee activity. Therefore, the market supply of coffee will fall.

The change in market supply will cause the price of coffee to increase. This will move further impacts on other markets. For instance,

The increase in demand will cause the PRICE OF COFFEE TO INCREASE. This will have further impacts on other markets. For instance,

• Tea (SUBSTITUTES) DEMAND will INCREASE
• Milk (COMPLEMENTS) DEMAND will DECREASE

The starting level of corporation tax for growers is set at stable. The input parameters can range between increase, stable and decrease.

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