Learnjng Sequence 10-11 Micro

Question 1

Excess demand

Answer 1

When demand for product is more rn a supply of product

Question 2

Excess supply

Answer 2

Where quantity of a good is more than the quantity demanded and price is above equilibrium level

Question 3

Equilibrium price

Answer 3

Price where quantity of goods supplied is equal to quantity of goods demanded

Question 4

Direct vs indirect tax

Answer 4

Direct: tax levied straight onto an individual or organisation
Indirect: tax levied on a product or service.

Question 5

Examples of indirect tax

Answer 5

Fuel duty, VAT, sales tax

Question 6

Examples of direct tax

Answer 6

Income tax, corporation tax

Question 7

Specific tax

Answer 7

Causes a parallel shift on the supply curve, bc the tax is the same fixed amount at all prices
Examples are fuel duty, beer duty

Question 8

Ad Valorem tax (always has %)

Answer 8

Causes a non-parallel shift on the supply curve, bc the tax increases as the amount sold increases
Examples are VAT, important tariffs

Question 9

Why does the gov impose taxes

Answer 9

To raise gov revenue or discourage certain activities

Question 10

Subsidy and why gov does it

Answer 10

Subsidy: grant given by the gov to encourage production

Question 11

Affect of subsidy on supply curve

Answer 11

Shifts to right, increases
Subsidy reduces cost of production, quantity increases, supply increases, shifts to right, price consumers pay decreases