Taxation

Question 1

Taxes reduce…………

Answer 1

external costs

Price increases ,quantity demanded and supplied decreases

Question 2

What are the costs of Taxation?

Answer 2

• Those on lower incomes pay a higher proportion of their income(regressive tax)
• May lead to illegal markets-may require policing

Question 3

What are the benefits of taxation?

Answer 3

• It raises tax revene for government
• quantity demand falls so impact on third parties decrease
• less spent on combatting negative externalities

Question 4

When may taxes not be effective?

Answer 4

• When PED is inelastic

- Other measures may be more effective

Question 5

It depends on

Answer 5

• State of the economy eg.Growth–>more employment ,rising wages and more confidence>more goods and services bought and increased VAT revenue has
• size of tax