Government Intervention Flashcards
(47 cards)
What is indirect tax?
Indirect tax is expenditure that can be passed onto consumers.
What are the uses of indirect tax?
Indirect tax can be used to generate revenue and solve market failures.
What is a specific indirect tax?
A specific indirect tax is a tax per unit.
What is an example of a specific indirect tax?
An example is the wine duty of 22.23.
What is an ad valorem tax?
An ad valorem tax is a tax as a percentage of the price.
What is an example of an ad valorem tax?
An example is VAT at 20%.
What are the components of indirect tax?
The components include consumer burden, producer burden, and producer revenue.
What is a subsidy?
A subsidy is a money grant provided by the government to support a specific sector or activity.
What are some effects of subsidies?
Subsidies can solve market failures and impact producer revenue, consumer spending, and employment.
What is DWL?
DWL stands for Deadweight Loss, which occurs when the allocation of resources is not efficient.
How do consumers benefit from subsidies?
Consumers benefit from lower prices and increased availability of goods and services.
What are the potential drawbacks of subsidies?
Subsidies can lead to dependency, misallocation of resources, and may require funding through taxes.
What is the impact of subsidies on employment?
Subsidies can create jobs in supported sectors but may also lead to job losses in others.
What is the relationship between subsidies and government revenue?
Subsidies can reduce government revenue by decreasing tax income from supported industries.
What is the Minimum Price?
The Minimum Price is a price floor set above the equilibrium price to protect producers.
Example: A minimum price can prevent prices from falling below a certain level.
What does excess supply mean?
Excess supply occurs when the quantity supplied exceeds the quantity demanded at a given price.
What are the outcomes of setting a minimum price?
Outcomes include a burden on producers, changes in consumer behavior, and potential deadweight loss (DWL).
What is producer revenue?
Producer revenue can change with intervention, such as setting a minimum price.
What is consumer surplus?
Consumer surplus is the difference between what consumers are willing to pay and what they actually pay.
What are unintended consequences of price floors?
Unintended consequences can include reduced consumer choice and potential harm to certain industries.
What is the impact of intervention on consumers?
Intervention can lead to higher prices for consumers and reduced access to goods.
What is the role of industry survival in price policy?
Industry survival can depend on the implementation of price policies, such as minimum prices.
What is the cost of intervention?
The cost of intervention can include expenses related to maintaining price floors and potential market distortions.
What is Maximum Pile?
Price control, price ceiling enacted by your valley set below the equilibrium price.
