Government Intervention Flashcards
(12 cards)
What are indirect taxes?
Taxes of expenditure; increases production costs so they supply less. This increases market price and demand reduces. This discourages the production/consumption of a demerit good e.g cigarettes
What are the two types of indirect taxes?
Ad Valorem
Specific tax
What is the incidence of tax?
Who bears the burden of a tax (producer or consumer)
What is Ad Valorem tax?
What is specific tax?
What is a subsidy?
Payment from the government to a producer to lower their costs of production and encourage more production. Encourages production of merit goods (full social benefit).
What is maximum price?
What is minimum price?
What are tradeable pollution permits?
Limits negative externality of pollution
Firms can pollute up to certain amount
Any surplus on permit can be traded
Advantages of tradeable pollution permits
Disadvantages of tradeable pollution permits
What is regulation?
