A potential barrier to understanding both the theory and application of tax policy is the jargon and terminology used to convey key concepts. Much of the terminology has been derived from micro-economic theory, while some of the concepts have emerged from welfare economics and public finance. We have attempted to remove the formality and rigidity of classic definitions in order to make the concepts more clear and meaningful for those who don't have a Ph.D. in economic theory. Consumption Tax A tax imposed on consumable commodities and services.
Most consumptive taxes are flat rate taxes.
Sales taxes, excise taxes and value added taxes are different forms of consumption taxes. Residents as well as visitors pay them. Recognizing that when applied to international travelers, they constitute an export tax, some countries have enacted rebate policies to entice tourists to shop while visiting. Demand Elasticity A measure of the percent change in quantity demanded resulting from a one- percent change in price. Elasticities are used to measure how demand responds to change in price.