1.2.9 Indirect Taxes and Subsidies

Question 1

Indirect taxes

Answer 1

The tax levied on expenditure on goods & services.

Question 2

Subsidy

Answer 2

It is a payment made by the government to a producer to lower their costs of production and encourage them to produce more and lower market price.

Question 3

Unit/ specific tax

Answer 3

The tax on each unit of a good or service regardless of the price of the unit.
Causes a parallel shift in the supply curve.

Question 4

As valorem

Answer 4

These taxes are percentages and are placed on the price of a good or service.
It causes the supply curve to pivot to the left.