MICRO L6 - Government Policies Flashcards
1
Q
Prices can be deemed to be ‘too high’ by governments & policymakers, what is used to fix this
A
A price ceiling prevents the price in the market from rising above a certain level
(maximum price)
2
Q
Prices can be deemed to be ‘too low’ by governments and policymakers, what can be used to fix this
A
A price floor prevents the price in the market from falling below a certain level
minimum price
3
Q
what is specific tax
A
- a fixed amount per unit sold
- £10 per unit
4
Q
what is ad valorem tax
A
- percentage of the price
- 10% of the price
5
Q
define incidence of tax
A
the distribution of tax on buyers and sellers
- it depends upon the elasticity of demand and supply
