Government Intervention Flashcards
Ad Valorem Tax
Taxes calculated from a fixed percentage of the good or service; The amount of tax increases as the price of the product increases.
Consumer Surplus
Refers to the difference between the highest price consumers are willing to pay for the good, and the price actually paid. It is shown under the demand curve but above the price line
Direct Taxes
Taxes paid directly to the government by the taxpayer, including personal income taxes, corporate taxes and wealth taxes
Excess Demand (shortage)
In the context of demand, occurs when the quantity of the good demanded is greater than the quantity of the good supplied, meaning there will be a shortage of the good.
Excess Supply (surplus)
In the context of supply, occurs when the quantity of the good demanded is smaller than the quantity of the good supplied, meaning there will be a surplus of the good.
Excise Taxes
Taxes imposed on the spending on particular goods or services (gas/petrol) they are a type of indirect tax
Indirect taxes
Taxes that are imposed indirectly, applied when you purchase a good or service
Producer Surplus
Refers to the difference between the price received by firms for selling their good, and the lowest price they are willing to accept to produce the good. It is shown as the area under the price but above the supply curve.
Shortage
Where the quantity demanded is greater than the quantity supplied.
Specific Tax
Tax calculated by the absolute amount per unit of the good or service.
Subsidy
An amount of money paid by the government to the firms for a variety of reasons: to prevent industry from failing, support producers incomes, or as a form of protection against imports. A subsidy given to firms results in a higher level of output, and lower prices for consumers. Can also be paid to consumers as financial aid or income redistribution
Surplus
The excess of something over something that it is being compared to. Too little demand for a product that has too much quantity.
