Chapter 14 Flashcards
What are indirect taxes?
Taxes on expenditure ( percentages such a VAT)
What is VAT?
An ad valorem tax ( where amount taxed is based on the value of the good)
What are excise duties?
A specific tax, where tax is not based on the value of the good but the quantity consumed.
What are subsidies?
A grant given by the government to encourage the production or consumption of a particular food or service.
What effect does an inelastic demand have on the burden of taxes?
Inelastic demand would mean that suppliers increase prices so the burden of tax is placed upon the consumers.
What effect does an elastic demand have on the burden of taxes?
Elastic demand would mean that the demand decreases if the price increases so the burden of the tax falls on the supplier.
What effect does inelastic supply have on the burden of taxes?
The burden falls upon the producer.
What effect does elastic supply have on the burden of taxes?
The burden falls upon the consumer.
