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A free rider is a person who receives the benefit of a good but avoids paying for it. Public goods are not excludable, the free-rider problem prevents the private market from supplying them. The government, however, can potentially remedy the problem. If the government decides that the total benefits exceed the costs, it can provide the public good and pay for it with tax revenue, making everyone better of.
48. Explain how our government raises and spends money. Describe the most important sources of tax revenue for our government budget.
The government spends money for a variety of reasons:
· Reduce inequality (welfare payments like unemployment benefit).
· Provide public goods (fire, police, national defence)
· Provide important public services like education and health (merit goods)
· Debt interest payments.
· Transport
· Military spending
Kazakhstan Government Spending 2004-2015
Government Spending in Kazakhstan remained unchanged at 4210256.50 KZT Million in the fourth quarter of 2014 from 4210256.50 KZT Million in the fourth quarter of 2014. Government Spending in Kazakhstan averaged 1413604.16 KZT Million from 2004 until 2014, reaching an all time high of 4210256.50 KZT Million in the fourth quarter of 2014 and a record low of 150857.30 KZT Million in the first quarter of 2005. Government Spending in Kazakhstan is reported by the Agency of Statistics of the Republic of Kazakhstan.
Income tax (main tax rate is 20%)
National Insurance
VAT (20% most goods and services)
Corporation tax (main rate 21%)
Council Tax (local government)
Business rates
Excise duties (alcohol, cigarettes)
Other taxes include (stamp duty, carbon tax, airport tax, inheritance tax, capital gains)
49 Describe the efficiency costs of taxes.
The efficiency of a tax system refers to the costs it imposes on taxpayers. There are two costs of taxes beyond the transfer of resources from the taxpayer to the government. The first is the deadweight loss that arises as taxes alter incentives and distort the allocation of resources. The second is the administrative burden of complying with the tax laws.
Efficiency Costs of Taxation Deadweight burden (also called excess burden) of taxation is defined as the welfare loss (measured in dollars) created by a tax over and above the tax revenue generated by the tax In the simple supply and demand diagram, welfare is measured by the sum of the consumer surplus and producer surplus The welfare loss of taxation is measured as change in consumer+producer surplus minus tax collected: it is the triangle on the figure The inefficiency of any tax is determined by the extent to which consumers and producers change their behavior to avoid the tax; deadweight loss is caused by individuals and firms making inefficient consumption and production choices in order to avoid taxation. If there is no change in quantities consumed, the tax has no efficiency costs
50Define alternative ways to judge the equity of a tax system. Explain why studying tax incidence is crucial for evaluating tax equity.
The equity of a tax system concerns whether the tax burden is distributed fairly among the population. According to the benefits principle, it is fair for people to pay taxes based on the benefits they receive from the government. According to the ability-to-pay principle, it is fair for people to pay taxes based on their capability to handle the financial burden. When evaluating the equity of a tax system, it is important to remember a lesson from the study of tax incidence: The distribution of tax burdens is not the same as the distribution of tax bills.
When considering changes in the tax laws, policymakers often face a trade-off between efficiency and equity. Much of the debate over tax policy arises because people give different weights to these two goals.
51 Explain the tradeoff between efficiency and equity in the design of a tax system.
A big issue in economics is the trade off between efficiency and equity.
Efficiency is concerned with the optimal production and allocation of resources given existing factors of production.
Equity is concerned with how resources are distributed throughout society.
An economic situation in which there is a perceived tradeoff between the equity and efficiency of a given economy. This tradeoff is commonly viewed within the context of the production possibility frontier, where any additional gains in production efficiency must be offset by a reduction in the economy's equity.
Within this equity and efficiency tradeoff, equity refers to the economy's financial capital, while efficiency refers to the future efficiency in the production of goods and services. This theory asserts that, in order for a nation to become wealthier, it must save its equity. However, these additional savings will hurt the development of more efficient production in the future.
52The meaning of costs. Define what items are included in a firm’s costs of production.
Cost is the price paid or required for acquiring, producing, or maintaining something, usually measured in money, time, or energy; expense or expenditure; outlay
Production costs can be used to compare the expenses of different activities within the company. In production, there are direct costs and indirect costs. For example, direct costs for manufacturing an automobile are materials such as the plastic, metal or labor incurred to produce such an item. Indirect costs include overhead such as rent, salaries or utility expense. Production costs are all the expenses related to how a company operates and what it does in order get a product into the hands of a customer or client. Manufacturers are most concerned about with production costs because they deal with factors such as equipment, utilities, raw materials and labor. All these count as production expenses, but companies have found it best to divide them up into different categories for closer analysis -- such as explicit and implicit costs or fixed and variable costs.
Total cost
-market value of the inputs s firm uses in production
Profit
Total revenue minus total cost
Costs like opportunity costs
-the cost of sth is whtau give up to get it.
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