Indirect taxes and subsidies (2) Lesson aims: To be able to draw and explain a subsidy diagram To explain how the tax burden on the consumers and producers are affected by elasticity of demand and supply

Recap 1.What is a specific tax? 2.What is an ad valorem tax? 3.Examples of each?

Subsidy A subsidy is a grant given by The Government as an incentive to produce or consume something, such as to farmers for growing crops

Subsidy See diagram Draw diagram/Fig.3 and write an explanation in your notes

Question 3, p minutes

Taxes, subsidies and elasticity The extent to which the burden falls on the producer or consumer depends on the elasticity of demand or supply; Look at the diagrams, draw and write explanations (Relate to figures 4 and 5)

Question 4, p.88 5 minutes

Homework SUVs, p.91 – In for Friday Reading – Chapter 13

So… What is a subsidy? Examples? How do the burdens on the consumers and producers depend on the elasticity of demand and supply?