Government Intervention Flashcards
Subsidy
financial assistance given by the government which lowers the price and increases production
Direct tax
a tax upon income
Indirect tax
an expenditure and sales tax upon goods and services, collected by producers and passed onto governments
Flat rate/ specific tax
a specific amount imposed on a good
Ad valorem tax
a tax expressed as a percentage, most common form of indirect tax
Government Revenue
Amount of money received by the government through the tax
Resource allocation
reallocation of resources due to the tax
Price ceiling
prices imposed below the equilibrium price, designed to help consumers by making prices cheaper
Price floor
prices imposed above market equilibrium designed to help producers by making prices higher
Parallel/ black/ informal market
unrecorded activity, no tax paid and regulations can be avoided
