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A consumption tax is a tax levied on consumption spending on goods and services. The tax base of such a tax is the money spent on consumption. Consumption taxes are usually indirect, such as a sales tax or a value-added tax. However, a consumption tax can also be structured as a form of direct, personal taxation, such as the Hall–Rabushka ...
In economics and particularly in consumer choice theory, the income-consumption curve (also called income expansion path and income offer curve) is a curve in a graph in which the quantities of two goods are plotted on the two axes; the curve is the locus of points showing the consumption bundles chosen at each of various levels of income.
Graphical representation of the consumption function, where a is autonomous consumption (affected by interest rates, consumer expectations, etc.), b is the marginal propensity to consume and Yd is disposable income. In economics, the consumption function describes a relationship between consumption and disposable income.
A cash-flow consumption tax is intended to confine the cash-flow tax burden to an individual's annual consumption and to remove nonconsumption expenses and current savings from the tax base. [9] The base is calculated by combining the year's gross receipts and savings withdrawals, and then subtracting the year's business and investment expenses ...
The "arithmetic effect" assumes that tax revenue raised is the tax rate multiplied by the revenue available for taxation (or tax base). Thus revenue R is equal to t × B where t is the tax rate and B is the taxable base (R = t × B). At a 0% tax rate, the model states that no tax revenue is raised.
The statutory incidence of a tax falls on the party, producers or consumers, that has to physically send a check to the government in the amount of a tax. [3] For example, if a person directly pays his or her income tax to the government [4] (with no employer withholding), the statutory burden would fall on consumers. If a tax is imposed on the ...
The three points R, S, and T in the graph hint different preference combinations. The line connecting these three points is called the income consumption curve (ICC). By extending Panel (a) to Panel (b), the Engel curve for good X is obtained by connecting the points R’, S’, and T’. [3]
Average propensity to consume (APC) (as well as the marginal propensity to consume) is a concept developed by John Maynard Keynes to analyze the consumption function, which is a formula where total consumption expenditures (C) of a household consist of autonomous consumption (C a) and income (Y) (or disposable income (Y d)) multiplied by marginal propensity to consume (c 1 or MPC).