Excise Tax and Consumer Choice

Flashcards focusing on key vocabulary related to excise tax, consumer behavior, and market efficiency.

Excise Tax

A tax on the sale of a specific good or service, not a lump sum.

Total Surplus

The total benefits that consumers and producers receive from participating in the market.

Deadweight Loss

The loss of economic efficiency that occurs when the equilibrium outcome is not achievable or not reached.

Consumer Surplus (CS)

The difference between what consumers are willing to pay for a good and what they actually pay.

Producer Surplus (PS)

The difference between what producers are willing to accept for a good and what they actually receive.

Tax Incidence

The distribution of the tax burden between buyers and sellers.

Market Efficiency

A market is efficient if total surplus is maximized.

Supply Shift

A change in the quantity supplied of a good due to factors like taxes, which can shift the supply curve.

Sin Tax

A tax levied on goods deemed harmful, like cigarettes or alcohol, aiming to discourage their consumption.

Excise Tax Effect on Supply

An excise tax shifts the supply curve leftward, indicating a decrease in supply due to higher costs.