Effect of taxes and subsidies on price

Taxes and subsidies can affect the price of a good or service. A tax is an extra cost that is added to a good or service. When this happens, it makes the good or service more expensive because people now have to pay more for it. Subsidies, on the other hand, reduce the price of a good or service by providing money to help pay for it. When this happens, it makes the good or service cheaper because people don't have to pay as much for it.