Part 03

Indirect Taxes

1. Explain the meaning of indirect taxes. Why are they called indirect?

2. Explain some reasons why governments impose indirect (excise) taxes.

3. The government is considering imposing (using) a $0.50 tax per gallon of gasoline.

Draw a picture of tax on the gasoline market, showing the price paid by consumers, the price received by producers, and the quantity of gasoline bought and sold.

4. For question 3, plzz write about the impacts of the tax on the gasoline market. What happens to price and quantity? Who gains and who loses from the tax?