Uplearn Notes
Tax
Q: What are the two main types of direct tax?
A: Income tax, and corporation tax.
Q: What are the two main types of indirect tax?
A: Ad Valorem Tax, specific.
Q: Define “specific tax”
A: A fixed amount of tax paid on each unit sold.
Q: What is the vertical distance between the S curve and the Stax curve?
A: The size of the tax.
Q: Show a specific tax diagram
A:
Q: What does the area of the rectangle on the left represent?
A: Tax revenue received by the government at a given quantity.
Q: What is another word for consumer burden and what is it?
A: Incidence of tax on consumers, the tax they pay
Q: What is another word for producer burden and what is it?
A: Incidence of tax on producers, the tax they pay
Q: What’s the UK’s most common tax on goods?
A: VAT
Q: What does VAT look like on a diagram?
A:
Q: Define VAT
A: Tax charged as a percentage of the price of a good.
Economic Thinkers
Q: What does the ‘invisible hand’ represent?
A: The way the economy would adjust in the free market through rationing, signalling, and incentivising goods (functions of the price mechanism).
Q: What did Adam Smith believe the ‘invisible hand’ would lead to?
A: An equilibrium that is best for society.
Q: What did Smith want from the government in his free market?
A: No intervention, just to lay out a framework for the market → a laissez-faire approach until market failure.
Q: What did Karl Marx believe of the free market economy?
A: It would eventually collapse and lead to a command economy.
Q: How have command economies failed in the past?
A: North Korea ended in famine which killed at least 3.5 million people; the USSR saw 10 million die at the start and China saw 30 million deaths — all linked to famine as the government underestimated how much food really had to be supplied.
Q: About how much of the world population owns 50% of global wealth?
A: 1%
Q: What did Freidrich Hayek think of Marx’s ideas?
A: He criticized them and thought it would be impossible for one government to collect information on what exactly consumers want.
Q: What did Hayek see the price mechanism as?
A: The ultimate communication network.
Q: What are the pros of free market economy?
A: Price mechanism is super efficient; lower prices for consumers due to high competition; lots of choice with competition.
Q: What are the cons of the free market economy?
A: Can lead to huge inequality; monopolies lead to high prices and lower quality of products; often leads to market failure, due to the free-rider problem and asymmetric information.
Q: What are the pros of a command economy?
A: Can correct market failure; can reduce inequality; can stop monopoly abuse.
Q: What are the cons of a command economy?
A: Can lead to government failure; destroys incentives to work for a profit, leading to slow economic growth and little living standard improvements; limited choice of goods and services.
