Y1 29 Indirect tax & market failure Flashcards
(2 cards)
1
Q
How does indirect tax affect market
A
Increased production cost, demand contracts
Internalises externality (producer pays)
Solved overconsumption/production
Allocative efficiency while generating government revenue
2
Q
Indirect taxation issues
A
Price inelastic demand
Perfect info assumptions, under/overtax
Black market- Police cost, government failure
Smuggling
