Government intervention:
- Taxes
- Subsidy
- Price ceiling (maximum price)
- Price floor (minimum price)
Taxes
Indirect (excise) tax is a tax on expenditure. It is added to the selling price of a good or service.
Specific tax is an indirect tax where a specific amount, e.g. $1, is added to the selling price of each unit.
Ad valorem tax is an indirect tax where a percentage, e.g. 20%, is added to the selling price of each unit. This unit looks at specific and ad valorem taxation and its affects on price and quantity. It also looks at the importance of PED and PES in taxation.
Be bold on sugar tax, Jamie Oliver says (BBC news)
http://www.bbc.co.uk/news/health-34576006
Subsidies
A subsidy is a a government payment per unit of output that supports a business or market. This section look at how the price is affected when the government allocates subsidies to producers.
Newspaper articles about Subsidies
Thai junta turns to populist subsidies to ease farmer tensions (Reuters)http://www.reuters.com/article/2015/11/04/us-thailand-politics-subsidies-idUSKCN0ST0J520151104?virtualBrandChannel=11563#Qe5t5Cs4di1mcCdD.97
EU cuts subsidies that support Spanish bullfighting (Telegraph)
Govt OKs B13bn in subsidies for rubber farmers (Bangkok Post)
http://www.bangkokpost.com/business/news/753076/govt-oks-b13bn-in-subsidies-for-rubber-farmers
Price controls
What happens when the government interferes with the market mechanism by artificially imposing a “better” price?
Price ceiling (maximum price) – a price imposed by an authority and set below the equilibrium price.
Price Floor (minimum price) – a price imposed by an authority and set above the equilibrium price.
Why Maximum price (ceilings) hurt renters
The Truth about Minimum wages
Germanys Minimum wage
UKs minimum wage http://www.bbc.co.uk/news/uk-26285447
Test your knowledge of taxes, subsidies and price controls