The Effects of Taxation

From Wikiversity

When a government imposes tax on particular goods, this action would have effects on equilibrium price and quantity. Basically, a tax is money collected by a government from businesses or individuals directly or indirectly against services provided to the community.

Contents 1 Sales Tax 1.1 Specific Tax 1.1.1 Effect on Price and Quantity 1.1.2 Effect on Welfare 1.2 Ad Valorem Tax 1.2.1 Effect on Price and Quantity 1.2.2 Effect on Welfare

[edit] Sales Tax

A tax which we will deal in today lecture is Sales tax or tax that occur when there is exchange of goods.

[edit] Specific Tax

Specific Tax is tax which place certain amount of 'specific' value on goods. For example, A tax of $5 is placed on every unit of quantity would mean that government get $5 for every unit traded.

[edit] Effect on Price and Quantity

[edit] Effect on Welfare

[edit] Ad Valorem Tax

Ad Valorem Tax is a tax based on value of goods or assets usually presented in term of percentage.

[edit] Effect on Price and Quantity

[edit] Effect on Welfare