1.2.9 Indirect taxes and subsidies

• What is an indirect tax?


  A tax on producers by the government
• Indirect taxes can split into?


  Specific taxes and ad valorem taxes
• What are Ad valorem taxes?


  Where the tax is a percentage of the cost of suply
• What is VAT?


  Value added tax which is currently at 20%

  An ad valorem tax
• What shift does ad valorem tax cause? 


  A pivotal shift
• What are specific taxes?


  Where tax per unit is a fixed amount
• What shift does specific tax cause?


  A parallel shift as its a fixed amount per unit