Booklet 5 - consumer + producer surplus + alternative views to consumer behaviour ( KEY WORDS )

AD valorem tax

the tax levied is a percentage of the selling price, meaning that a higher amount of tax is paid at a higher price. VAT is 20%

Consumer surplus

the difference between what the consumer pays and what they are willing to pay

Excise duty

an indirect tax on particular goods/services to discourage their consumtion

Habitual behaviour

where consumers persist in acting in a particular way even when conditions change

incidence of tax

the way in which the burden of paying a sales tax is divided between buyers and sellers

indirect tax

a tax levied on expenditure of goods and services

producer surplus

the difference between the price a firm recieves and the price it would be willing to sell it at in order to maximise profits

specific tax

a tax of a fixed amount imposed on purchases of a product

subsidy

a grant given by the government to producers to encourage production of a good or service