1.4.1 government intervention

• reasons why government imposes tax

  • raise revenue
  • improve efficiency in free market
  • redistribute income
• reasons for government intervention

  • correct market failure
  • protect consumers
  • protect producers
• indirect tax 


  paid partly by consumers and partly by producers
• types of indirect tax

  • specific = fixed amount of tax placed on a particular good
  • ad valorem = a percentage added depending on the value / price of the product ( VAT )