This scenario shows what happens when something creates additional artificial costs for the suppliers.
Some costs are called “artificial” to distinguish them from those costs that are directly related to the manner of production.
Our Tim Horton’s franchisee has to pay for land, equipment, labour, capital, and the raw materials of the coffee shop trade. Those costs are real.
But if something imposes additional costs that are not normally associated with selling you a cup of coffee, those costs are termed “artificial”
The Mafia in New York, as an infamous example, uses coercion to get restaurants to use their high priced laundry service.
And governments use coercion to get retailers to collect taxes.
As you can see, when costs increase for the suppliers, they will need increased prices to cover their costs.
And at those increased prices, demand will fall. (The higher the price, the less is demanded.)
