19/10/15
Lesson 1- Indirect Taxes
Learning Objective: Define and give an example of an indirect tax.
DA: Explain why a government would impose an indirect tax on demerit good(s)?
Indirect tax-
Two types of indirect taxes:
DA: Explain why a government would impose an indirect tax on demerit good(s)?
Indirect tax-
- Imposed upon expenditure, on the selling price.
- Raising the firm's costs and shifts the supply curve for the product vertically upwards by the amount of the tax.
- Less product will be supplied at every price.
Two types of indirect taxes:
- Specific tax
- Percentage tax
Complete the following questions from the example given in the video:
1. Tax per unit?
2. Total tax revenue?
3. Total amount of tax paid by consumers?
4. Total amount paid by producers?
5. Total expenditure (spending)?
6. Total revenue for firms?
1. Tax per unit?
2. Total tax revenue?
3. Total amount of tax paid by consumers?
4. Total amount paid by producers?
5. Total expenditure (spending)?
6. Total revenue for firms?
Activity/HW: Using google news, identify an article on taxation and complete the following (illustration needed).
1. Brief summary the article (150-200 words).
2. Identify and explain whether the product is elastic or inelastic.
3. Illustrate the diagram and label the following:
- Tax burden for consumers/producers.
- Government revenue.
- Consumer/producer surplus.
- Deadweight/welfare loss.