Taxes

• Indirect taxes

  1. taxes imposed on goods/services supplied by firms (include specific and ad valorem)
  2. Impact the producer who can then decide to pass some of the tax burden on to consumers in the form of higher prices
• specific taxes

  charged as a set amount per unit of good eg alcohol or sugar
• Ad valorem tax

  charged as a percentage value of a good eg. VAT
• AD Valorem taxes are shown by inward pivot shifts
• Evaluations for indirect taxes

  1. Size of tax
  2. Differences in market
  3. PED (Price elasticity of Demand)
• On a tax diagram you can show


  1. revenue
  2. producer surplus
  3. producer share of tax
  4. consumer surplus
  5. consumer share of tax
  6. whole tax