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What is the impact of minimum prices?
It will create a surplus in the market. Normally the price would fall as a result, but it is not allowed to fall below the min, so the surplus remains
What is the impact of maximum prices in the market?
They tend to distort the market and lead to its disequilibrium. It can either be set above the equilibrium price (ineffective), or below, causing a shortage.
What is the impact of subsidies shown in the diagram?
A subsidy will shift the supply curve to the right and therefore lower the equilibrium price in a market. The aim of the subsidy is to encourage production of
Who is benefiting from the subsidy?
Who is benefiting from the subsidy proves the incidence [that indicates who, by law, the subsidy is intended to help.]
What is the difference between the impact and the incidence of a tax?
Impact refers to the initial burden of the tax, while incidence refers to the ultimate burden of the tax.
What happens with the supply and quantity demanded of a market when a tax is imposed to a company?
.
what is the incidence of taxes?
It is an economic term for understanding the division of a tax burden between stakeholders, such as buyers and sellers or producers and consumers.
What is a producer incidence of tax?
The proportional of total tax revenue paid by producers (for indirect taxes)
What is an consumer incidence of tax?
The proportional of total tax revenue paid by costumers (for indirect taxes)
Difference between direct and indirect taxation?
A direct tax is one that the taxpayer pays directly to the government. An indirect tax is one that can be passed on to another person or group by the owner
What is a tax?
charges imposed by government on people or businesses
The elasticity of demand will affect the likely consequences of the subsidy. True or False?
True
What happens if the government introduces a subsidy on a producer?
A fall in their unit costs will lead to an outward shift of the market supply curve (shifts down), Lower equilibrium price, Increase in the equilibrium quantity
What is a production subsidy?
It is a 'loan' Provided in order to encourage the production of a product. In order for manufacturers to increase their production output, the government compen
What is a subsidy?
It is a financial support to a supplier, occasionally to consumers. It usually involves a tax reduction, a payment, loans or a rebate.
What type of people does a subsidy involve?
It involves an individual, a business, or institution, that receives a benefit from the government.
What is deadweight loss?
It is the inefficient allocation of resources, because suppliers could sell more and buyers are willing to pay more. It is the consequence of a price ceiling
A consequence of minimum oprice:
There is more supply than demand, which produces a surplus
Who does minimum price controls protect?
The sellers
Maximum price should be fixed above the equilibrium. True or False?
False
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