ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -A tax is a mandatory fee or financial charge levied by any government on an individual or an organization to collect revenue for public works providing the best facilities and infrastructure. The collected fund is then used to fund different public expenditure programs.

Detailed explanation-2: -This was done to introduce the best approach of broadening the base, lowering marginal tax rates, reducing rate differentiation, simplifying the tax structure, etc. This article will highlight the tax reforms carried out in India that are important for the UPSC examination.

Detailed explanation-3: -When there is an increase in unit tax on the production of goods by the government, the unit cost of production will rise and consequently, the firm would supply less than before at the given price. The supply would decrease implying that the supply curve would shift to the left.

Detailed explanation-4: -Taxes, though, result in a higher cost of production and a higher purchase price for the consumer. This, in turn, causes production volumes (and, therefore, supply) to drop, leading to a drop in demand for these goods and services. This gap between the taxed and tax-free production volumes is the deadweight loss.