Chapter 7 – Taxes

These flashcards cover important concepts related to taxes, tax incidence, types of taxes, and their implications on economic behavior and efficiency.

Tax Incidence

A measure of who really pays a tax.

Excise Tax

A tax charged to suppliers on each unit sold.

Deadweight Loss

The value of lost transactions due to taxation, representing inefficiency.

Progressive Tax

A tax that takes a larger share from high-income earners than from low-income earners.

Regressive Tax

A tax that takes a smaller share from high-income earners than from low-income earners.

Elasticity of Demand

A measure of how much the quantity demanded responds to a change in price.

Elasticity of Supply

A measure of how much the quantity supplied responds to a change in price.

Tax Revenue

The total money a government collects from taxes.

Administrative Costs

The resources used to collect a tax and enforce compliance.

Ability-to-Pay Principle

The principle that those with a greater ability to pay should pay more taxes.

Benefits Principle

The principle that those who benefit from public services should pay for them.

Marginal Tax Rate

The percentage of income taxed on additional earnings.