LS 11- Taxes & Subsidies Flashcards
1
Q
What is an indirect tax?
A
A tax levied directly on a firm or individual
2
Q
What is an indirect tax?
A
A tax levied on a good or service
3
Q
What is a specific tax? (With examples)
A
When the tax is fixed and causes a parallel shift.
E.g.
-Fuel Duty
-Beer Duty
4
Q
What is an ad Valorem tax?
A
Tax increases as amount sold rises, causes a non-parallel shift.
E.g.
VAT
Import tariffs
5
Q
Why do governments impose taxes?
A
To raise revenue or to discourage certain economic activities
6
Q
Why do governments give subsidies?
A
To encourage production
7
Q
What is a subsidy?
A
Money given by a government to encourage production
