Indirect Taxes

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6 Terms

1
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Why do governments intervene?

to support households and firms. they do this through subsidies, taxes, etc.

2
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What is an indirect tax?

tax that is imposed on expenditure eg.sales tax, GST (goods and service tax), VAT (value added tax)

3
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What do indirect taxes do:

allow gov to gain revenue or to discourage the consumption of a good or service.

4
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Types of indirect tax:

specific tax (fixed amount imposed on a product)

ad valorem tax (tax is a percentage of the selling price)

5
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What are the effects of indrect taxation:

They increase the firms COP thus supply is affected

6
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Deadweight loss definition:

lost producer and consumer surplus that represents a decrease in efficiency and community surplus.