Taxes and Subsidies in Microeconomics

A collection of vocabulary flashcards covering key concepts related to taxes and subsidies in microeconomics, based on the provided lecture notes.

Taxes

Mandatory contributions levied on individuals or corporations by a government entity, used to raise government revenue or discourage behavior.

Tax Burden

The analysis of who bears the cost or burden of a tax, which can affect consumers and producers differently.

Tax Wedge

The difference between the price paid by consumers and the price received by sellers due to taxation.

Elasticity

A measure of how much the quantity demanded or supplied of a good responds to changes in price.

Deadweight Loss (DWL)

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

Subsidy

A payment made by the government to either buyers or sellers to incentivize consumption or production of a good or service.

Consumer Surplus (CS)

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

Producer Surplus (PS)

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

Market Equilibrium

The state in which market supply and demand balance each other, resulting in stable prices.

Inelastic Demand

A type of demand in which consumers are less sensitive to price changes.

Welfare Effects of Taxes

The impact of taxation on consumer surplus, producer surplus, and the overall efficiency of the market.

Welfare Effects of Subsidy

The outcomes resulting from subsidies which can increase consumer and producer surplus while potentially creating inefficiencies.

Commodity Tax

A tax levied on the sale of specific goods, commonly referred to as excise taxes.