Taxes & Subsidies (L11) Flashcards
1
Q
Direct tax
A
Tax levied directly on an individual or organisation
2
Q
Indirect tax
A
Tax levied on a good or service
3
Q
Specific tax
A
Parallel shift in supply curve , the tax stays at a fixed amount at all prices eg fuel duty or beer duty
4
Q
Ad valorem tax
A
Non-parallel shift in the supply curve. Tax increases as amount sold rises eg VAT and import tariffs
5
Q
Why do governments impose taxes
A
To raise government revenue and discourage certain economic activities
6
Q
Why do governments give subsidies
A
To encourage production
7
Q
Subsidies
A
Money given by the government to encourage production
