Government Intervention (TAX) Worksheet 1

1. Governments impose taxes because?

a.
b.
c.
2. Define Indirect Tax?

Specific Tax (Flat)

Ad Valoerm

Tax (%)

3. Draw a diagram to Show 1. Consumer Surplus, 2. Producer Surplus, 4. Tax burden on

Consumer, 5. Tax Burden on Producer, 6.Total Tax , 7.Total producer revenue before tax ,
8.total revenue after tax, 9.Dead weight loss,(consumer , producer and total)

4. In what proportion is the burden of the tax divided between buyers and sellers .Explain with
examples?

Linear functions & specific tax

The demand & supply functions Qd = 1000 100P and Qs = 200 + 200P and a
specific Tax of $2
5. Draw & Solve 1. Consumer Surplus, 2. Producer Surplus, 4. Tax burden on Consumer, 5. Tax
Burden on Producer, 6.Total Tax , 7.Total producer revenue before tax , 8.total revenue after
tax, 9.Dead weight loss,(consumer , producer and total)

Government Intervention (Subsidies) Worksheet 2

1. Governments provide subsidies because?
a.
b.
c.
d
2. Draw a diagram to Show & calculate 1. Consumer Surplus, 2. Producer Surplus, 4. Subsidy
effect on Consumers expenditure, 5. Subsidy effect on Producer revenue, 6.Total Subsidy ,
7.total producer revenue before Subsidy , 8.total revenue after Subsidy, 9.Welfare loss,
(consumer , producer and total)

The demand & supply functions

Qd = 1000 100P and Qs = 200 + 200P and Subsidy

of $2