advertisement

Demand Supply Indirect Taxes

40 %
60 %
advertisement
Information about Demand Supply Indirect Taxes
Education

Published on September 19, 2013

Author: arvindtirkey

Source: authorstream.com

advertisement

Demand & Supply: Demand & Supply Impact of Indirect Taxes IB DP ECONOMICS PowerPoint Presentation: A normal curve: a state of equilibrium D S Qe Pe Quantity Price ($) 0 Demand & Supply: PowerPoint Presentation: Imposition of a specific tax / a percentage tax (ad valorem tax) D S S + tax Qe Pe Quantity Price ($) Q1 P1 0 Demand & Supply: Shift in supply curve vertically upwards by the amount of tax PowerPoint Presentation: Indirect taxes: PRODUCER’S REVENUE D S S + tax Qe Pe Quantity Price ($) P2 0 Q1 P1 Market is in equilibrium, being demand & supply at a price of Pe . After Government imposed tax (XY shown in next slide), the supply curve shifts vertically upwards from S to S+tax . What happens when cost of producing a product increases due to tax imposition? What happens to the product? What happens to the demand of the product? When demand falls, then look at the amount of supply at this new increased price. How much is the supply at this new stage in comparison to quantity demanded? This would bring a new equilibrium, which is at a price of P1 and the quantity of Q1. Supply is in excess & demand is less. So what would happen to the price? And then what would happen to demand? PowerPoint Presentation: Indirect taxes: PRODUCER’S REVENUE D S S + tax Qe Pe Quantity Price ($) P2 0 Q1 P1 W C Y X What will happen to the price that the consumers pay? Here we see that when the product price rose from Pe to P2, the demand fell, that made producers to reduce the price from P2 to P1. Since price fell, therefore, the demand should rise, hence demand rose from Z to X, meaning consumers will pay the increased price from Pe to P1, which is half of the share of tax. Z PowerPoint Presentation: Indirect taxes: PRODUCER’S REVENUE D S S + tax Qe Pe Quantity Price ($) P2 0 Q1 P1 W C Y X Here producers would get C for the quantity they supply Q1, after paying the tax of XY to the government. As discussed earlier, consumers pay half of the tax (PeP1) and producers pay the other half ( PeC ). Z + Producer’s revenue before tax is imposed Producer’s revenue after tax is imposed The revenue for producers fall from 0PeWQe to 0CYQ1, where PeC is contributed by the producer for tax. What will happen to the amount received by the producer? PowerPoint Presentation: Indirect taxes: PRODUCER’S REVENUE D S S + tax Qe Pe Quantity Price ($) P2 0 Q1 P1 W C Y X Government receives tax revenue equal to CP1XY and that the market falls in size from one producing Qw units to one producing Q1 units. This may well have implications. What can that be? Producers are producing less. What change will happen in the production system? Z Tax revenue for government What happens to the amount received by the government? PowerPoint Presentation: Indirect taxes: BURDEN ON WHOM? D S S + tax Qe Pe Quantity Price ($) P2 0 Q1 P1 W C Y X Burden of indirect taxes are shared fairly evenly between the consumers and the producers. Z Tax burden for producers What happens to the tax amount paid by producers & consumers? Tax burden for consumers PowerPoint Presentation: D S S + tax Qe Pe Quantity Price ($) Q1 P1 0

Add a comment

Related presentations

Related pages

Indirect taxes and subsidies - Economics Online

Indirect taxes . Indirect taxes are those imposed by a government on goods and services, in contrast to direct taxes, such as income and corporation tax ...
Read more

Fiscal Policy - Analysing Direct and Indirect Taxes ...

Indirect taxes. Indirect taxes – include VAT and excise duties. ... depending on the price elasticity of demand and supply for the product.
Read more

IB Economics Notes - 3.1 Indirect taxes

IB Economics notes on 3.1 Indirect taxes. Tweet. IB ... Shift in supply curve due to indirect tax. ... Tax incidence and price elasticity of demand and supply.
Read more

Effect of Indirect taxes on Demand and Supply (Economics ...

This video explains the effect of indirect taxes on demand for and supply of a product. This is tested in various exams such as IB Diploma ...
Read more

Indirect tax - Wikipedia, the free encyclopedia

An indirect tax (such as sales tax, ... This is a function of the relative elasticity of the supply and demand ... even income taxes may be indirect. The ...
Read more

Indirect taxes | Economics | tutor2u

Price Elasticity of Demand and Indirect Taxes. Revision videos. Direct and Indirect Taxes. ... Fiscal Policy - Analysing Direct and Indirect Taxes.
Read more

Tax incidence and deadweight loss - Microeconomics | Socratic

The best videos and questions to learn about Tax incidence and deadweight loss. ... Indirect taxes are those where the ... Probably you have already ...
Read more

Indirect taxes' Effect on Supply - part 1 - YouTube

Indirect taxes' Effect on Supply - part 2 - Duration: 7:04. ... Inelastic Demand - Duration: 12:41. Jason Welker 27,098 views. 12:41
Read more

Effect of Taxes on Supply and Demand - CFA Level 1 ...

Tax Effects. This section illustrates how taxes alter the supply and demand equilibrium creating deadweight.
Read more