Hello, Econ Whizzes! Today, we're going to dive into the wonderful world of indirect taxes. Think of them as the stealthy ninjas of the economic world. Why? Let's find out!

Indirect taxes are applied to goods or services, or on your expenditure. They come in two flavors

Unit Taxes: A fixed dollar amount per unit of the good. For example, there's a tax of $4.00 on each pack of cigarettes. It's like a cover charge at your favorite gig!

Ad Valorem Taxes: A percentage on the price of a good, such as the 15% Goods and Services Tax (GST) in New Zealand. Just imagine getting 15% more fries in your meal. But in this case, it's a cost, not a bonus.

Governments love indirect taxes! They use them to

• Collect tax revenues. It's like a grand treasure hunt, and the treasure helps run the government!
• Reduce consumption of 'bad guy' goods (demerit goods), like tobacco, alcohol, and sugar, which can harm both the consumer and society.
• Discourage naughty production processes that pollute, or to cut down the use of fossil fuels. Think of it as the government's way of grounding polluting industries.
• Lower imports in certain industries, offering a helping hand to home-grown businesses and workers.