Y1 16 Indirect Taxes Flashcards
(5 cards)
1
Q
What is an expenditure tax?
A
Tax that increases production costs and can be passed down to consumers by price increase
2
Q
What is a specific tax?
A
Tax per unit
3
Q
What is an Ad Valorem
A
Tax as a % of price
4
Q
Specific tax effects
A
S curve shifts upwards, price increases and quantity falls
5
Q
Indirect tax pros and cons
A
Pros: Raise gov revenue, potentially solve market failure
Cons: Regressive nature, producers leave market, black market formation
