Indirect Taxation- Evaluation Points

Consumer/Producer Surplus if tax+

both down

Income Inequality

taxes are larger proportion of income for lower income households

Employment

jobs could be lost as less is produced therefore less employees needed

Black Markets

black markets could be created for consumers to avoid paying tax

Govt. Revenue

goes up

Market failure

tax could internalize external costs of production / eliminate the triangle of welfare loss and so lead to social optimum equilibrium position

PED

the more price inelastic, the greater the tax revenue and burden on consumers