1/3 - Supply

Question 1

What are indirect taxes?

Answer 1

Taxes that the government put on goods and services.

Question 2

What are 2 arguments for indirect taxes?

Answer 2

• Government can discourage consumption of certain goods e.g cigarettes.
• They are less easy to avoid, it ensures that the entire population pays tax unlike direct taxes (income tax) where the poor aren’t taxed.

Question 3

What are 2 arguments against indirect taxes?

Answer 3

• They make the distribution of income more unequal because the poor get taxed a higher proportion of their income.