1.5 Indirect Taxes & Subsidies

Question 1

Indirect taxes + eg

(vs direct taxes + eg)

Answer 1

Expenditure tax paid to gov by producers, which increases production cost but can be transferred to consumers via higher prices (VAT, tariffs, plastic bag levy)

direct taxes cant be transferred (income tax)

Question 2

Specific tax

Answer 2

a fixed amount of tax added to each unit of a good/service, dependent on the quantity that is bought no matter its price

Question 3

Ad valorem tax

Answer 3

a tax calculated as a percentage of the price of a good/service

Question 4

Subsidies

Answer 4

Money grant to firms by gov to reduce production costs and encourage an increase in output