1.2.9Indirect taxes and subsidies

Question 1

Indirect tax

Answer 1

-Levied by government (usually on demerit goods)
-Increase production costs
-Supply shifts inward
-Price increases
-Demand contracts
-Raise government revenue

Ad valorem:
-Percentage of total price
-e.g. VAT - 20%

Specific:
-Set tax per unit
-58p per litre fuel duty on unleaded petrol