1.2.9 Indirect taxes and subsidies

• What is an ad valorem tax?

  A tax levied as a percentage of the value of the good
• What does the term "incidence of tax" refer to?

  The tax burden on the taxpayer
• What is a specific or unit tax?

  A tax levied by volume
• What is a subsidy?

  A grant given which lowers the price of a good
• Why are subsidies usually designed?

  To encourage production or consumption of a good