Glossary
User:
Adam Gore
Activity:
The Government in a Mostly Market Economy
Curriculum:
Economics
Date:
Fri, Sep 26 13:46:59 GM
12 items printed.
Fri, Sep 26 13:46:59 GM
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Glossary
excise tax - a tax on a particular good or service. Theoretically, an excise tax can be assessed
at any point -- when the good or service is produced, sold, or consumed. Most often, though, it is
when the good or service is sold and is paid by the purchaser. An excise tax is in addition to the
regular sales tax. Excise taxes are frequently assessed on goods that the government wishes to
discourage the purchase of, such as gasoline, tobacco, or alcohol. They are also frequently
assessed on what are not considered to be necessities, such as automobiles, motorcycles, airline
tickets, and telephone services.
externalities - indirect effects of markets that are not corrected within the markets; benefits or
costs to those not buying or selling in the market. Externalities are also known as spillovers.
They can be either positive or negative. Positive externalities are indirect benefits that occur from
market actions. For example, a housing development opens near a store and the store gains
new customers. Negative externalities are indirect costs that occur from market actions. For
example, if a pig farm opens in the midst of a suburban housing development , the quality of life
and the property values will be adversely affected.
federal taxes - taxes imposed by the federal government of the United States.
income tax - a tax on the income of a person or firm.
market failure - when a market fails to establish fair prices and use resources efficiently or
properly.
market power - when a participant in a market has the ability to ignore competition and can
demand and receive a price above the market price. This usually occurs because the market
supplier controls enough resources or enough of an important resource to influence the market.
progressive tax - a tax that varies depending on the income of the person being taxed; that is,
the tax rate increases as income increases. The federal income tax is an example of a
progressive tax. People with little income pay a lower tax rate, while those with more income pay
a higher tax rate.
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Glossary
public goods and services - those goods and services available to all citizens from or through
the government. Many public goods and services are available to the general public, regardless
of citizenship. Different governments provide different goods and services, depending on whether
the economy is primarily market or command. Some common public goods and services
provided by all governments are national defense, police and fire protection, a justice system, and
primary education. Public goods and services are seen as providing substantial benefits to the
country and its citizens, but cannot be adequately supplied by using the markets. Therefore, the
government guarantees their availability by supplying them.
real estate tax - a tax on real estate (houses, other structures, and land) owned or sold.
regressive tax - a tax that takes a larger share of your income as your income goes down.
Sales taxes and the social security tax are both examples of regressive taxes. Regressive taxes
are more of a hardship on the poor than the wealthy.
sales tax - a general tax on purchases. Sales taxes are broad and apply to most purchases.
Usually, a percentage of the price is added to the purchase to be paid in taxes. If there is a 10%
sales tax and a chair costs $500, the consumer must pay $550 for that chair -- $500 for the chair
itself and $50 in sales tax. The store is required to turn over the $50 paid in sales tax to the
government.
spillovers - see externalities.
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