Taxes Flashcards
What is a direct tax?
Paid by an individual or an organization to an entity that imposed it
What is an indirect tax?
A tax levied on goods and services supplied by businesses .(part of the price) It includes both specific and ad valorem taxes
What is an ad valorem tax?
Based on the value of a good or service based on its value , expressed as a percentage
What is the incidence of tax?
The distribution of tax paid between consumers and producers
What is a subsidy?
A government grant to a firm, reducing production costs and encourages an increase in output
What is progressive tax?
Tax rate that increases or progresses as taxable income increases, directly proportional.
What is regressive tax?
A tax that is applied , regardless of income
What is an excise duty tax?
A tax imposed on specific goods or services
What is a Pigouvian tax?
A tax imposed on goods or services that create negative externalities
What are the effects of a subsidy/ what does it depend on?
Decrease production costs, increase output, increase profits/revenue=> SNP
HIDO: Opportunity cost, elasticity, SR/LR( Time lag)
What are the effects of a tax/ what does it depend on?
Increased production costs, decreased output, decreased profits/revenue=> lower dynamic efficiency
HIDO: Opportunity cost, elasticity, SR/LR( Time lag)
Why does the government use subsidies?
To solve market failure and encourage production/ increase affordability