The level of income tax will influence the level of household income. For instance, a decrease in the level of income tax will cause an increase in the level of household income. The higher household income will increase the demand for all normal and luxury goods. If we assume that coffee is a normal good, then the higher income will increase the demand for coffee (shift to the right).

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 income tax is set at stable. The input parameters can range between increase, stable and decrease

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