Microeconomics: Government Intervention and Indirect Taxes

This set covers the vocabulary and core concepts regarding government intervention in markets, including various types of indirect taxes, subsidies, price controls, and historical tax examples.

Specific tax

An indirect tax where a fixed amount is added to the price of a good or service.

Percentage tax (ad valorem tax)

An indirect tax where a given percentage is added to the price of a good or service.

Excise tax

Taxes applied to a narrow range of products with the aim to reduce consumption of those products.

Import tariff

A tax on imported goods designed to protect domestic industry.

Beard Tax

A historical tax imposed by Tsar Peter the Great requiring men (excluding peasants and clergymen) to pay $100$ roubles for a 'beard token'.

Soap tax

A source of revenue in England that was scrapped in $1835$ by prime minister Gladstone, allowing the industry to flourish.

window Tax

A tax introduced in $1696$ and repealed in $1851$ based on the assumption that occupants with more windows could afford to pay more.

brick Tax

A British property tax introduced in $1784$ to help pay the national debt accrued during the American War of Independence.

Tattoo Tax

A $6$ percent sales tax applied to the creation of tattoos in Arkansas, USA.

Sunrise industries

New or emerging industries that governments support to redistribute income and promote economic growth.

Consumer tax incidence

The burden of tax paid by the consumer, taking the form of higher prices and lost consumer surplus.

Producer tax incidence

The burden of tax paid by the producer, taking the form of lost sales and lower profit margins.

Welfare loss (Deadweight Loss)

The loss of welfare, utility, or benefit to market participants resulting from taxes, protectionist policies, or externalities.

Subsidy

An amount of money paid by the government to a firm per unit of output, which reduces the costs of production.

Gogoro

A company that projected a $20$ percent market share for electric scooters in Taiwan during $2020$ due to government subsidies.

NT$28,000$

The maximum subsidy amount provided to owners for replacing an old four-stroke scooter with an electric or new gas-fueled scooter in Taiwan.

Price ceiling

A legal maximum price at which a good or service can be sold, often imposed on merit goods.

Price floor

A legal minimum price at which a good or service can be sold, such as minimum wage or alcohol price controls.

Merit goods

Goods or services considered beneficial for people that are typically underprovided by the market, such as public education or healthcare.

Demerit goods

Goods that the government discourages the consumption of through indirect taxes or regulations, such as cigarettes and alcohol.