Microeconomics

Table of Contents

1. Topic pack - Microeconomics - introduction
2. 1.1 Competitive Markets: Demand and Supply
3. 1.1 Competitive Markets: Demand and Supply - notes
4. 1.1 Competitive markets - questions
5. 1.1 Competitive markets - simulations and activities
6. 1.2 Elasticities
7. 1.2 Elasticities - notes
8. Section 1.2 Elasticities - questions
9. Section 1.2 Elasticities - simulations and activities
10. 1.3 Government intervention
11. 1.3 Government Intervention - notes
    1. The impact of taxation
    2. Tax revenue
    3. Tax incidence
    4. Calculating effects of a specific tax
    5. Calculating impact of a tax - example
    6. The impact of subsidies
    7. Calculating effects of a subsidy
    8. Calculating effect of a subsidy - example
    9. Price controls
    10. Price ceilings
    11. Calculate effects of price ceiling
    12. Calculating effect of a price ceiling - example
    13. Price floors
    14. Calculate effects of price floor
    15. Calculating effect of a price ceiling - example
    16. Intervention in agricultural markets
    17. Common Agricultural Policy
12. 1.3 Government intervention - questions
13. 1.3 Government intervention - simulations and activities
14. 1.4 Market failure
15. 1.4 Market failure - notes
16. Section 1.4 Market failure - questions
17. Section 1.4 Market failure - simulations and activities
18. 1.5 Theory of the firm
19. 1.5 Theory of the firm - notes (HL only)
20. Section 1.5 Theory of the firm - questions
21. Section 1.5 Theory of the firm - simulations and activities
22. Print View

Government Intervention - notes

Syllabus: Explain why governments impose indirect (excise) taxes.

Definition: An indirect tax is a tax imposed (levied) on one entity (eg producer or seller) and paid in part or whole by another entity (buyer, consumer) for example sales taxes (GST, VAT, excise duty etc)

You should be able to complete this sentence `A tax on a good shifts ...´ if you cannot then ask your neighbour and then memorise the sentence.

Syllabus: Distinguish between specific and ad valorem taxes.

There are 2 different types of indirect taxes which affect supply slightly differently:

Specific (or per unit) tax A specific tax is a fixed amount of tax charged on each unit (eg R$5 per packet). A specific tax will shift the supply curve vertically upwards and parallel by the amount of the tax. Examples include cigarette, petrol and alcohol taxes.

Ad-valorem tax A tax that is levied (charged) as a percentage of the selling price. An example of an ad valorem tax would be VAT (Value Added Tax, a sales tax). An ad valorem tax shifts supply curve upwards by the amount of the tax and the two curves will diverge. Examples would be VAT and GST type taxes.