Indirect taxes and subsidies (Unit 1)
- Created by: Jake Da Floatilla Bird
- Created on: 15-04-13 22:29
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Indirect Taxes:
- An indirect tax = increases production costs = decrease in supply
- A specific tax is levied as a fixed amount per unit of a good or service
- specific tax = supply curve parallel shift left = prices rise = output falls
- An Ad valorem tax is levied as a percentage of the price of a good
- The monetary value of the tax rises when price rises
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