Tax Flashcards
0
Q
What is specific tax?
A
A tax per unit on products such as alcohol, petrol and cigarettes.
Paid by the producer, so supply curve shifts up and is parallel.
1
Q
What is ad valorem tax (VAT)?
A
A tax that is proportionate to the costs of production. Paid by the producer so the supply curve shifts up but diverges.
2
Q
Define subsidy?
A
A subsidy is a payment by the government to producers to encourage output and consumption.
3
Q
Define firms income?
A
Revenue from sales+total subsidy.
4
Q
What are indirect taxes?
A
Taxes levied on the purchase of goods and services (expenditure).
5
Q
What are demerit goods?
A
Goods with negative externalities that are overconsumed or overproduced.
