Taxation

    Cards (62)

    • What are indirect taxes used for in microeconomics?
      To raise government revenue and solve market failure
    • What are the two general types of taxes mentioned?
      Indirect taxes and direct taxes
    • What is a direct tax?
      Taxes on income that can't be transferred
    • How are indirect taxes defined?
      Expenditure taxes added when goods are sold
    • What is a specific indirect tax?
      A tax per unit of a good sold
    • How does a specific indirect tax affect the supply curve?
      It shifts the supply curve parallel upwards
    • What is an ad valorem tax?
      A tax as a percentage of the price
    • How does an ad valorem tax shift the supply curve?
      It pivots the supply curve upwards
    • What happens to government revenue with a high price under an ad valorem tax?
      It generates a high amount of revenue
    • What is the impact of an indirect tax on market equilibrium?
      It increases price and decreases quantity
    • How is government revenue calculated after an indirect tax is implemented?
      Tax per unit multiplied by quantity sold
    • What does the consumer burden represent in the context of indirect taxes?
      The difference in price due to the tax
    • What is the producer burden in relation to indirect taxes?
      The remaining amount after consumer burden is deducted
    • How is producer revenue calculated before an indirect tax?
      Price times quantity sold
    • What happens to producer revenue after an indirect tax is implemented?
      It decreases due to tax deductions
    • What is a deadweight welfare loss in the context of indirect taxes?
      A loss of economic efficiency due to reduced quantity
    • How do indirect taxes affect consumers?
      They raise prices and lower consumer surplus
    • Why are indirect taxes considered regressive?
      They take a larger proportion from low-income households
    • What is the impact of inelastic demand on indirect taxes?
      The impact on consumers will be greater
    • How do indirect taxes affect producers and workers?
      They lower producer revenue and may cause job losses
    • What is the government's perspective on indirect taxes?
      They raise revenue and address market failures
    • What unintended consequences can arise from indirect taxes?
      Creation of black markets and harm to consumers
    • What are the key impacts of an indirect tax based on elasticity?
      Consumer burdens, producer burdens, and government revenue
    • What is a deadweight loss in relation to indirect taxes?
      A loss of economic efficiency due to reduced market activity
    • What are the key impacts of indirect taxes on the market?
      • Increase in production costs
      • Shift of supply curve to the left
      • Higher prices for consumers
      • Decrease in quantity sold
      • Reduction in consumer surplus
      • Creation of deadweight loss
    • What are the effects of indirect taxes on different stakeholders?
      • Consumers: Higher prices, lower surplus, regressive impact
      • Producers: Lower revenue, potential job losses
      • Government: Increased revenue, market failure solutions, unintended consequences
    • What happens to consumer and producer burdens when demand is price elastic?
      Consumer burden is lower, producer burden is higher
    • How do you calculate government revenue from an indirect tax?
      Tax per unit multiplied by quantity sold
    • What is the relationship between quantity sold and government revenue when demand is price elastic?
      Lower quantity leads to lower government revenue
    • What occurs when demand is perfectly price elastic?
      Consumer burden is zero, producers bear all burden
    • What happens to consumer and producer burdens when demand is price inelastic?
      Consumer burden is higher, producer burden is lower
    • How does the quantity sold affect government revenue when demand is price inelastic?
      Higher quantity leads to higher government revenue
    • What is the purpose of indirect taxation in the context of market failure?
      To solve market failure by increasing costs
    • How does indirect taxation affect firms' costs of production?
      It increases firms' costs of production
    • What is the consumer burden when demand is perfectly price inelastic?
      Consumer burden equals the indirect tax value
    • What type of market failure is addressed by indirect taxation?
      Overconsumption, not overproduction
    • What is a negative externality?
      Costs imposed on third parties
    • What happens to the marginal private cost (MPC) curve when an indirect tax is imposed?
      The MPC curve shifts to the left
    • What happens to producer burden when supply is price elastic?
      Producer burden is lower, consumer burden is higher
    • What does a perfect indirect tax do to the MPC curve?
      It aligns MPC with marginal social cost (MSC)
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