This document discusses subsidies and taxation as tools to correct market failures. It explains that subsidies aim to change relative prices and are given to producers, while taxation can be specific or ad valorem and is typically levied on producers. Both subsidies and taxes can distort markets by shifting supply curves and altering price signals. Their welfare effects depend on who bears the costs and benefits.
1) Indirect taxes are imposed on expenditures and raise firms' costs, shifting the supply curve left. The tax amount is the vertical difference between the original and new supply curves.
2) Subsidies have the opposite effect of taxes by shifting the supply curve downward, lowering prices. This increases producer revenue and consumer expenditure.
3) Price controls set maximum or minimum prices, creating shortages or surpluses. Governments intervene by subsidizing production, buying excess supply, or restricting imports to maintain the control. However, this can lead to inefficiency if firms are not incentivized to reduce costs.
The document discusses demand and supply theory, laws of demand and supply, and equilibrium. It also discusses market failures including externalities, imperfect information, and market dominance. Market failures can result in both productive and allocative inefficiencies where optimal output and allocation of resources are not achieved.
This document discusses subsidies and taxation as tools to correct market failures. It explains that subsidies aim to change relative prices and are given to producers, while taxation can be specific or ad valorem and is typically levied on producers. Both subsidies and taxes can distort markets by shifting supply curves and altering price signals. Their welfare effects depend on who bears the costs and benefits.
1) Indirect taxes are imposed on expenditures and raise firms' costs, shifting the supply curve left. The tax amount is the vertical difference between the original and new supply curves.
2) Subsidies have the opposite effect of taxes by shifting the supply curve downward, lowering prices. This increases producer revenue and consumer expenditure.
3) Price controls set maximum or minimum prices, creating shortages or surpluses. Governments intervene by subsidizing production, buying excess supply, or restricting imports to maintain the control. However, this can lead to inefficiency if firms are not incentivized to reduce costs.
The document discusses demand and supply theory, laws of demand and supply, and equilibrium. It also discusses market failures including externalities, imperfect information, and market dominance. Market failures can result in both productive and allocative inefficiencies where optimal output and allocation of resources are not achieved.
Konsep syarikat, konsep tirai perbadanan dan pengecualiannya, jenis-jenis sya...Intan Muhammad
Please do check Companies Act 2016 yeah :)
P/S : Hi, I am sharing my personal notes of law-related subjects. Some parts of them are explained in a very informal-relaxed way and mix of languages (BM and English). Secondly, as law revolves every day, there will be outdated parts in my notes. Two ways of handling it.. (1) double check with the latest law and keep it to yourself (2) same with No. 1 coupled with your generosity to share with us, the LinkedIn users (hiks ^_^). Till then, have a nice day!
Konsep syarikat, konsep tirai perbadanan dan pengecualiannya, jenis-jenis sya...Intan Muhammad
Please do check Companies Act 2016 yeah :)
P/S : Hi, I am sharing my personal notes of law-related subjects. Some parts of them are explained in a very informal-relaxed way and mix of languages (BM and English). Secondly, as law revolves every day, there will be outdated parts in my notes. Two ways of handling it.. (1) double check with the latest law and keep it to yourself (2) same with No. 1 coupled with your generosity to share with us, the LinkedIn users (hiks ^_^). Till then, have a nice day!
