Indirect taxes and subsidies

• Ad valorem tax is an indirect tax based on a percentage of the sales price of a good or service. An increase in VAT causes an inward shift in the supply curve
• Direct tax is a tax on income and wealth where the burden of the tax cannot be passsed on to someone else
• Emission tax is a charge made to firms that pollute the environment based on the quantity of pollution they emit
• Indirect tax is imposed on producers by the government ➢ The producer then passes this cost onto the consumer
• Specific tax is a set tax per unit imposed by the government
• subsidy are payments by the government to suppliers reduce their costs. The effect of a subsidy is to increase supply and reduce the market equilibrium price
• Tax incidence is the manner in which the burden of an indirect tax is shared between participants in the market
• Unit tax is a specific tax per unit sold