Excise tax - taxes paid when a good is purchased.
Indirect tax - a tax not paid directly by the consumer, instead it is placed on the producer.
This a ect the supply curve to shift left because the cost of production increase.
There are 2 kinds of indirect taxes that we focus on in IB
1. Ad Valoren tax (percentage tax- VAT )
Ad Valoren = according to value
A tax that is a percentage based on the selling price of the product.
Bene ts : imposing VAT on luxury goods can reduce inequality because rich people must be charged
more expensive on buying luxury goods.
2. Speci c tax
A xed amount of tax that is placed on a product
Agraphotfaxonon withsugarcontent
beverages
Example: $1 speci c tax for all blue jeans a rigtobelow18g
price s s
s
TITE
specifictax
S2 S t tax
a
51 p
is a
pe
peu
wit b
d
pfa
g e
n Quantity
j a o Qe
aconsumertaxburden bproducertaxburden
Whatisthedifferencebetween
aspecific andpercentageindirecttax
17thedifferent way oftax'simposing
O Quantity
a setamount oftaximpose
Percentagetax toa percentagebasedonasellingP
StTax
S 2 Graph
specificparallel
21 Percentage Scurveslope
e
F amountoftax
a
Quantity
, Subsidies tax inverse
give to a firmto reduce cost of production per unit
subsidies
why
whyGov subsidies politics
promote consumption
promote locale mployment of
persuasivepromise prime minister political
aspects
411 515 surplus
consumer
prodffetive
price gsub
1 Subsidy
Pp
1
f Psub
4.5
Baggy extraCs after
pm extra pg alter
s
subsidy
payforit
taxpayers
increase Pdecreases increasesQ
goodCs
don'tuse
bad itsubsidyisonproductsyou
goodgetmoremoney inincreaseaincrease costofproductionfalls
bad Producers
whodon'tgetsubsidiesaresad
good acneivegoitgoaice.g.mauefoodaneapen.neippoorcm.ae wingscheaper
bad owl wastedmoney opportunitycostofmoneysued oneducationhealthcareetc
goodreduceunemployment
sad
good when itis necessity
bad cigarette
Indirect tax - a tax not paid directly by the consumer, instead it is placed on the producer.
This a ect the supply curve to shift left because the cost of production increase.
There are 2 kinds of indirect taxes that we focus on in IB
1. Ad Valoren tax (percentage tax- VAT )
Ad Valoren = according to value
A tax that is a percentage based on the selling price of the product.
Bene ts : imposing VAT on luxury goods can reduce inequality because rich people must be charged
more expensive on buying luxury goods.
2. Speci c tax
A xed amount of tax that is placed on a product
Agraphotfaxonon withsugarcontent
beverages
Example: $1 speci c tax for all blue jeans a rigtobelow18g
price s s
s
TITE
specifictax
S2 S t tax
a
51 p
is a
pe
peu
wit b
d
pfa
g e
n Quantity
j a o Qe
aconsumertaxburden bproducertaxburden
Whatisthedifferencebetween
aspecific andpercentageindirecttax
17thedifferent way oftax'simposing
O Quantity
a setamount oftaximpose
Percentagetax toa percentagebasedonasellingP
StTax
S 2 Graph
specificparallel
21 Percentage Scurveslope
e
F amountoftax
a
Quantity
, Subsidies tax inverse
give to a firmto reduce cost of production per unit
subsidies
why
whyGov subsidies politics
promote consumption
promote locale mployment of
persuasivepromise prime minister political
aspects
411 515 surplus
consumer
prodffetive
price gsub
1 Subsidy
Pp
1
f Psub
4.5
Baggy extraCs after
pm extra pg alter
s
subsidy
payforit
taxpayers
increase Pdecreases increasesQ
goodCs
don'tuse
bad itsubsidyisonproductsyou
goodgetmoremoney inincreaseaincrease costofproductionfalls
bad Producers
whodon'tgetsubsidiesaresad
good acneivegoitgoaice.g.mauefoodaneapen.neippoorcm.ae wingscheaper
bad owl wastedmoney opportunitycostofmoneysued oneducationhealthcareetc
goodreduceunemployment
sad
good when itis necessity
bad cigarette
