Indirect taxes and subsidies (Unit 1)

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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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