taxation

what are the different taxes and what do they mean

direct tax is any tax levied directly on a person's business earnings, both income and corporate

an indirect tax is put on producers by the government to improve welfare. examples include VAT or excise duties

how does a tax work for firms.

a tax increases the cost of production causing a decrease in the supply curve. with an indirect tax it, the burden can be passed onto the consumer depending on the elasticity

where is the burdern of tax on a diagram and who pays it

1. new equalibrium to old supply curve

2. who pays the burden depends on the elastisity

what is a spesific tax

when the actual number of the tax is added to the product or service. parallel shift in the supply curve

what is an AD valorem tax

a tax which is a percent of business earnings. it can be passed onto consumers depending on PED