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Introducing Taxes and Tax Incidence definitions

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  • Public Services
    Essential functions like education, police, and fire protection funded by government revenue from compulsory charges.
  • Per Unit Tax
    A fixed charge applied to each item exchanged, increasing total cost for every additional unit bought or sold.
  • Demand Curve
    A graphical representation showing the relationship between price and quantity desired by buyers in a market.
  • Supply Curve
    A graphical line illustrating how much sellers are willing to offer at various prices in a market.
  • Equilibrium Price
    The market value where the quantity supplied matches the quantity demanded before any external intervention.
  • Equilibrium Quantity
    The amount of goods exchanged where market supply and demand intersect without outside influence.
  • Market Inefficiency
    A situation where resources are not allocated optimally, often resulting from external interventions like taxes.
  • Tax Incidence
    The division of a compulsory charge's burden between buyers and sellers, determined by market adjustments.
  • Price to Buyer
    The total amount paid by purchasers, including both the good's cost and any compulsory charges.
  • Price to Seller
    The net amount received by suppliers after any compulsory charges are deducted from the transaction.
  • Curve Shift
    A movement of the supply or demand line, typically leftward, reflecting the impact of external factors like compulsory charges.
  • Tax Burden
    The share of a compulsory charge absorbed by each market participant, often expressed in dollars or percentages.
  • Graphical Representation
    A visual tool used to illustrate how compulsory charges affect market prices, quantities, and participant outcomes.