Econ 1 - Taxation

Question 1

indirect tax

Answer 1

tax on spending

Question 2

direct tax

Answer 2

tax on income

Question 3

advantages of taxation

Answer 3

1. reduced consumption of demerit goods
2. requires little management by government once it’s imposed
3. a source of revenue for the
   government
4. increased efficiency

Question 4

disadvantages of taxation

Answer 4

1. punishes responsible consumers
2. time lag
3. Higher prices for consumers