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Introducing Taxes and Tax Incidence definitions

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  • Tax
    A government-imposed charge per unit of a good, used to fund public services and affecting market prices and quantities.
  • Public Services
    Essential functions like education, police, and fire protection, funded by government revenue from taxes.
  • Per Unit Tax
    A fixed amount charged for each item exchanged, causing price and quantity changes in the market.
  • Demand Curve
    A graphical representation showing the relationship between price and quantity demanded, shifting left when taxed.
  • Supply Curve
    A graphical line depicting the relationship between price and quantity supplied, shifting left when taxed.
  • Market Equilibrium
    The point where supply and demand intersect, determining the price and quantity traded before and after tax.
  • Price to Buyer
    The total amount paid by consumers, including the original price and any imposed tax.
  • Price to Seller
    The amount received by suppliers after subtracting any tax paid to the government.
  • Tax Burden
    The portion of a tax cost shared between buyers and sellers, regardless of who is initially taxed.
  • Tax Incidence
    The division of tax responsibility between consumers and producers, measured in dollars or percentages.
  • Graphical Representation
    Visual tools used to illustrate how taxes shift supply or demand curves and alter market outcomes.
  • Quantity Exchanged
    The number of units traded in the market, which decreases when a tax is imposed.
  • Equilibrium Quantity
    The amount traded at the intersection of supply and demand before any tax is applied.
  • Inefficiency
    A market outcome where fewer goods are exchanged than at equilibrium, often caused by taxes.
  • Percentage Share
    The fraction of total tax paid by each party, calculated as a proportion of the tax amount.