a) Indirect taxation

a) supply and demand analysis, elasticities, and: the impact of indirect taxes on consumers, producers, and government; the incidence of indirect taxes on consumers and producers; the impact of subsidies on consumers, producers, and government; the area that represents the producer subsidy and consumer subsidy

indirect taxation

• increases consumer spending on a good

• decreases producer profit from a good

• increases government revenue

specific tax on a price inelastic good

• t = marginal tax

• C = consumer burden

• P = producer burden

• C + P = government revenue

specific tax on a price elastic good

• t = marginal tax

• C = consumer burden

• P = producer burden

• C + P = government revenue

ad valorem tax for a price inelastic good

• t = marginal tax

• C = consumer burden

• P = producer burden

• C + P = government revenue

ad valorem tax for a price elastic good

• t = marginal tax

• C = consumer burden

• P = producer burden

• C + P = government revenue