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Ad Valorem Tax A tax charged as a percentage of the price of the good.

Consumers and producers have imperfect and unequal market knowledge upon which to make
Asymmetric Information
their economic decisions and this could lead to a misallocation of resources.

All resources are allocated by the government,…

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Opportunity Cost The value of the next best alternative forgone.

The responsiveness in demand for a good due to a change in its price.
(% Qd) / (% P) Avaliability of Subsititutes
PED < 1 ( Price Inelastic) Luxury/Necessity
PED PED > 1 (Price Elastic) Addictive
PED = 1 (…

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It is difficult to measure the value obtained by consumers of public goods and hence it becomes
Valuation Problem
hard to establish a market price of them.

(% Qd) good B / ( % P) good A
XED Complementary goods (-ve) Substitutes
goods (+ve)

(% Q) / ( % Y)…


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