Indirect Taxation and Government Intervention: Analyzing through Economic Models

The video explores indirect taxation as a form of government intervention to address market failures, particularly in cases of over-provision. It covers the types of fiscal interventions, including unit and ad valorem taxes, and their effects on supply and demand. The video also explains how indirect taxes can internalize externalities using supply-demand and marginal cost-benefit frameworks, with examples like congestion charging. The goal is to improve market welfare by aligning private decisions with social costs.

What is the main economic justification for government intervention in markets?

How does indirect taxation help to rectify market failure?

What are the two types of fiscal government intervention mentioned?

Explain the difference between unit taxes and ad valorem taxes.

What happens to the supply curve when an indirect tax is applied?

How does the price elasticity of demand affect the burden of indirect taxes?

What is the relationship between tax revenue and the quantity sold after a tax is imposed?

Describe how indirect taxation can eliminate deadweight loss in a market.

What is meant by 'internalizing the externality' in the context of indirect taxation?

How did the congestion charge in London aim to reduce traffic and emissions?