Determine if the items below are characteristics of taxes, subsidies or both. Assume that markets are perfectly competitive.
1. Create a wedge between the price that buyers pay and the price that sellers receive.
2. Increase the price that buyers pay.
3. Result in dead weight loss.
4. Increase the price that sellers receive.
5. Result in government revenue.
6. Shared by both buyers sellers.
Characteristic of : Taxes only Subsidies only Both Taxes and Subsidies
Taxes and Subsidies.
Taxes refer to the additional charges imposed by the government on a certain product in order to generate revenue. At the same time, the government may also impose taxes on certain items in order to curb the high market demand on it. E. g: Sin Tax on cigarettes. On another hand, Subsidy is a financial aid granted by the government to a certain individual or businesses in order to ease some type of burden as part of its economic policy to spur growth. E. g: Petroleum Subsidy to Public Transportation Sector.
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Determine if the items below are characteristics of taxes, subsidies or both. Assume that markets ar...
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