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Summary Edexcel A-Level Economics, Theme 1: Government Intervention and Failure - Indirect Taxes £2.99
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  2.  
  3. PEARSON (PEARSON)
  4.  
  5. Economics
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  7. Theme 1: Govt Intervention and Failure

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Summary Edexcel A-Level Economics, Theme 1: Government Intervention and Failure - Indirect Taxes
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A summary of: - Different types of indirect taxes - How indirect taxes can be used to correct negative externalities of production. - Advantages and disadvantages of using indirect taxes

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  • June 25, 2022
  • 7
  • 2021/2022
  • Summary

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MICROECONOMI
INDIRECT TAXES + NE
EX

, WHY?
• Can correct neg. externalities e.g excessive pollution & CO2 emissions.
• Increases firms’ prod costs  leftward shift of MPC  higher price & contractio
in demand;
• Therefore, reduces negative impact as external costs of production are
internalised e.g. CO2 emissions, environmental damage etc.
• BUT to achieve SOE, govt must ensure that: indirect tax = MEC at the SOE

Definitions
Indirect tax = a tax that is not directly paid to the government by an
individual; applied on certain g&s.
Unit/specific tax = same amount of tax paid for each unit produced [paralle
shift]
Ad valorem tax = tax paid as a % of a product’s price e.g. VAT [rotational sh

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