Taxes and subsidies Flashcards
1
Q
what is ad valorem tax
A
tax added based off a percentage of of the value of a good
2
Q
what is a direct tax
A
a tax directly on an individual or organisation such as income tax
3
Q
what is an indirect tax
A
a tax payed on goods and services such as value added tax (VAT)
4
Q
how does tax effect supply?
A
tax will effect supply as there will be an increase in the cost of production
5
Q
what will taxes lead to
A
- higher consumer prices particularly for harmful goods
- higher costs of production for suppliers
- government revenue
6
Q
what is a subsidy
A
a government grant given to producers to encourage supply onto the market
7
Q
what do suppliers use subsidies for
A
- to invest in new technology
- to buy new machinery
- To innovate
- to invest in human resources (to re-train etc.)
- to lower production costs
8
Q
what do subsidies lead to
A
- lower consumer prices
- lower costs of production
- government spending
9
Q
what are the alternate views to consumer behaviour
A
- consumers may be influenced by others
- habitual behaviour
- misinformation
- computational failure
