1.2.9

Question 1

Ad valorem tax

Answer 1

A tax levied as a percentage of the value of the good (a percentage tax)

Question 2

Ad valorem meaning

Answer 2

According to value

Question 3

Incidence of tax

Answer 3

The tax burden on the tax payer ie. some of the incidence of a tax will usually fall on consumers and some will usually fall on firms

Question 4

Specific or unit tax

Answer 4

Tax levied on volume

Question 5

Subsidy

Answer 5

A grant given which lowers the price of a good, usually given to encourage production or consumption of a good

Question 6

Tax revenue

Answer 6

The amount of money gained by the government from the tax = tax per unit x quantity sold

Question 7

Perfectly price elastic supply

Answer 7

The price elasticity of supply where 100% of the incidence of the tax will fall on consumers

Question 8

Perfectly price inelastic demand

Answer 8

The price elasticity of demand where 100% of the incidence of the tax will fall on consumers

Question 9

Perfectly price inelastic supply

Answer 9

The price elasticity of supply where 100% of the incidence of the tax will fall on firms

Question 10

Perfectly price elastic demand

Answer 10

The price elasticity of demand where 100% of the incidence of the tax will fall on firms