Elasticity: Indirect taxes and subsidies

Question 1

What is direct tax?

Answer 1

taxes that are paid directly by the individual or businesses to the government. burden of tax cannot be passed on to someone else

Question 2

Examples of direct taxes:

Answer 2

taxes on income (including profits) and wealth

• income tax
• corporation tax
• capital gains tax

Question 3

What is an indirect tax?

Answer 3

a tax imposed on producers ( suppliers) by the government

Question 4

examples of indirect taxes:

Answer 4

• duties (taxes) on cigarettes
• alcohol and fuel
• sugar levy (2018) and VAT

Question 5

why might gov impose an indirect tax?

Answer 5

• raise tax revenue

- reduce consumption/ production of a particular good

Question 6

what is consumer incidence of tax?

Answer 6

tax passed on to the consumer

Question 7

what is producer incidence of tax?

Answer 7

tax that the producer cannot pass on

Question 8

what is a subsidy?

Answer 8

a form of government intervention, it usually involves a payment by the government to suppliers that reduce their costs of production and encourages them to increase output of a good or service