Question:

How do you compute for the Ad Valorem tax?

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ok so we were given amounts and we have already determined the supply curve, demand curve and Market equilibrium. then the professor told us that what if a 10% ad valorem tax was imposed. i just wanna know if im supposed to add 10% on the prices on my supply and demand OR either of the two only.

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  1. Homework!!  The idea is for you to look up the answer.  That way you "learn" how to deal with issues like the one you present.  Having someone else provide the answer is cheating, You!!!


  2. An ad valorem tax (Latin: by value) is a tax based on the value of real estate or personal property. An ad valorem tax is typically imposed at the time of a transaction (a sales tax or value-added tax (VAT)), but it may be imposed on an annual basis (real or personal property tax) or in connection with another significant event (inheritance tax or tariffs).

    So an ad valorem tax is imposed on the VALUE of the property taxed.

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