Chapter 3 Definitions: Government microeconomic intervention (AS Level) Flashcards
Market failure
Market failure is a term used to denote where the free market does not make the best use of scarce resources.
Regulation
The term regulation refers to the various means by which governments seeks to control production and consumption.
Taxes
Taxes are charges imposed by governments on incomes, profits and some types of consumer goods and services to fund their expenditure.
Maximum price
Maximum price is a price that is fixed, such that the market price must not exceed it.
Minimum price
Minimum price is a price that is fixed, such that the market price must not go below this price..
Direct tax
Direct tax is one that taxes the income of people and firms and cannot be avoided.
Indirect tax
Indirect tax is a tax that is levied on goods and services.
Ad valorem taxes
Ad valorem tax is an indirect tax levied as a proportion or percentage of the price charged by the retailer.
Value Added Tax (VAT) or General Sales Tax (GST) are typical examples.
Specific taxes
Specific taxes tax is an indirect tax levied as a fixed amount per unit purchased.
Incidence
Incidence denotes the extent to which the tax burden is borne by the producer or the consumer or both.
Proportional tax
Proportional tax is a tax that takes the same proportion or percentage from all who have to pay it.
Progressive tax
Progressive tax is a tax that takes a higher percentage from those with higher incomes.
Regressive tax
Regressive tax is a tax that takes a greater percentage from those on lower incomes.
Subsidies
Subsidies are direct payments made by governments to the producers of goods and services.
Transfer payment
Transfer payment is a hand-out or payment made by the government to certain members of the community.
