Indirect taxes are imposed by the government and they increase production costs for producers. Therefore, producers supplyless. This increases market price and demandcontracts.
There are two types of indirect taxes:
Ad Valorem
Specific taxes
Ad valorem taxes are percentages, such as VAT, which adds 20% of the unit price. This is the main indirect tax in the UK.
Specifictaxes are a set tax per unit, such as the 58p per litre fuel duty on unleaded petrol.
