Business economy Essay Example | Topics and Well Written Essays - 1000 words

Business economy - Essay ExampleAn excise tax is defined as a tax oblige on a specific amount per unit of product, and for this reason is sometimes also referred to as a specific tax (Keats & Young, 2005, p. 149). In contrast, there atomic number 18 ad valorem taxes such as sales taxes, which are imposed on the value or price of the product or service.Taxes imposed on colicky goods are also called sin taxes. They are usually state-sponsored taxes which legislators readily resort to at times when the government is seen to run a budget deficit and take to raise funds. The taxpayers rarely protest any imposition or increase of sin taxes, for the reason that the tax is not imposed on the general human beings but only those who buy the product which is seen as harmful to them, anyway. Sin taxes may either be specific or ad valorem, and are for the most part imposed on cigarettes or tobacco, liquor, and gambling. (Investopedia, 2009)The price, income and cross-price elasticities of d emand as well as the price duck soup of supply all bear on the effectivity of high-minded sin taxes. Price elasticity measures changes in demand due to changes in prices of the good, income elasticity the changes in demand due to changes in the buyers income, and the cross-price elasticity of demand changes in demand for a good due to a percentage change in the price of a related good. On the some other hand, the price elasticity of supply refers to the percentage change in the quantity supplied for a good given the percentage change of price for that same good.These intravenous feeding elasticities are important in the determination of the tax incidence, though those that bear most directly are the price elasticities of demand and supply. This is because diametric commodities have different responses to increase in prices, and governments selection of which commodities to tax and how much to tax will determine government revenue. Rose (2003) observes that this was considered b y Adam smith