Indirect taxes and subsidies

Indirect taxes and subsidies
Effect on an indirext tax on the demand for and supply of a product Indirect tax- one imposed upon expedenture. it is put on the selling price of a product because of this tax less products will be made
A specific tax-
A fixed add on to a price so s+1
A percentage tax- this is where the tax is a percentage of the selling proce so as the price of something goes up so does the tax.
Producers revenue




Government tax revenue
Government gets new taxes





Tax burden
The burden is on both of them





Price elasticity
Demand is elastic and supply is inelastic
However as the price goes up demand falls.
So the suppliers have to carry most of the burden




Demand is inelastic and supply is elastic.



Rules-
Where the value of ped is equal to the value of pes for a product then the burden of any tax imposed will be shared equally.
PED Value is greater- greater on the producer
PED value is less- greater on the consumer
So taxes are placed on cigs and booze
The effect of a subsidy on the demand for and supply of a product. A subsidy is an amount of money paid to a firm by the government per unit of income

To lower the price of essential goods

To guarantee products that the governemnt thinks are necessary

To enable producers to compete with overseas trade








Subsidys-
Opportunity cost-
Will the subsidy make companies inefficient
Who is paying the taxes
What damage will it do to companies ofshore who are not recivieng subsidies.