Microeco

Question 1

Specific Taxes

Answer 1

Specific taxes are a type of indirect tax that is levied as a fixed amount per unit of a good or service, rather than as a percentage of its price. The tax amount remains constant regardless of the price of the product.

Question 2

Indirect Taxes

Answer 2

Indirect taxes are taxes imposed on goods and services rather than directly on individuals or businesses.

Question 3

Direct taxes

Answer 3

A direct tax is a type of tax that is paid directly to the government by an individual or an organization. It is imposed on income, wealth, or property rather than on goods and services.i

Question 4

Ad valorem tax

Answer 4

An ad valorem tax is a type of indirect tax that is charged as a percentage of the value (price) of a good or service

Question 5

Price ceiling

Answer 5

A price ceiling is a government-imposed maximum price that can be charged for a good or service. It is set below the market equilibrium price to make essential goods more affordable for consumers.

Question 6

Price floor

Answer 6

A price floor is the minimum price set by a government or regulatory body that must be paid for a good or service. It is designed to prevent prices from falling below a level that would threaten the financial stability of producers

Question 7

PED

Answer 7

Price Elasticity of Demand Measures the responsiveness of quantity demanded (consumers) of a particular good to a change in the good’s price

Question 8

PES

Answer 8

Price Elasticity of Supply is how responsive quantity supplied is to the change of a good’s price

Question 9

YED

Answer 9

Income Elasticity of Demand measures the responsiveness of quantity demanded (consumers) of a particular good to change income

Question 10

Normal goods and Inferior goods

Answer 10

Normal goods are goods for which demand increases as income rises, and demand decreases when income falls.
Inferior goods are goods for which demand decreases as income rises, and demand increases when income falls.

Question 11

Formula for PED

Answer 11

% change in quantity demanded OVER % change in price

Question 12

Formula for PES

Answer 12

% change in quantity supplied OVER % change in price

Question 13

Formula for YED

Answer 13

% change in quantity demanded OVER % change in income

Question 14

Subsidies

Answer 14

a direct or indirect payment to individuals or firms, usually in the form of a cash payment from the government or a targeted tax cut to aid production

Question 15

Government intervention

Answer 15

Government intervention refers to actions taken by governments to influence the market and regulate economic activity, often to address market failures, promote economic growth, or achieve social and political objectives