16) Indirect Taxes And Subsidies

Question 0

What is ad valorem tax

Answer 0

⚫️tax is levied as a percentage if the selling price

Question 1

What is an indirect tax

Answer 1

⚫️a tax on expenditure
➡️two major types of indirect taxes
➡️ad valorem
➡️specific

Question 2

Give an example of ad valorem tax

Answer 2

⚫️VAT
➡️more expensive a good is
➡️more tax you pay

Question 3

What is a specific tax

Answer 3

⚫️where the tax is levied as a fixed amount

Question 4

Give an example of specific tax

Answer 4

⚫️excise duties
➡️levied on demerit goods
➡️such as alcohol tobacco and petrol 
➡️intention of decreasing consumption of goods
➡️which are seen as bad for individuals

Question 5

Describe indirect taxes on demand supply diagram

Answer 5

➡responsibility of producer to pay indirect tax to government
➡️adds to the cost of production
➡️supply curve shifts to the left by the amount of the tax