Tax and Subsidies

Question 1

Direct tax

Answer 1

Tax levied directly on an individual or organisation

Question 2

Indirect tax

Answer 2

Tax levied on a good or service

Question 3

Indirect tax

Answer 3

Tax levied on a good or service

Question 4

Specific Tax

Answer 4

Causes a paralle shift in the supply curve - same fixed amount at all prices - fuel duty, beer duty

Question 5

Ad valorem tax

Answer 5

Causes a non-parallel shift in the supply curve - tax increases as the amount sold rises - VAT, import tarrifs

Question 6

Reasons for taxes

Answer 6

A
Govts impose tax to increase government revenue and to discourage certain ecnomic activites - sugar tax, tobacco tax