1.2.9: Indirect taxes and subsidies

• Indirect tax: Tax imposed on producers which can be passed onto consumers through price
• Examples of Indirect taxes are VAT and Excise duty
• Producer subsidies: Payment to producers by the government to reduce the costs of production
• Consumer subsidies: Payments to consumers to allow them to purchase more of a good or service
• Subsidies cause a shift to the right in demand or supply
• Indirect taxes cause a shift to the left in demand or supply
• Indirect taxes are a tax on expenditure