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Incidence of Indirect Taxes on Consumers and Producers

Study Edexcel Economics tax-incidence questions by calculating how an indirect tax is shared between consumers and producers after the market equilibrium changes.

Syllabus
2019
Course
Economics YEC11
Level
AS

Exam points

  • Read the tax diagram carefully, distinguishing the consumer price, producer price and the vertical tax wedge.
  • Calculate consumer incidence from the consumer share of the tax per unit multiplied by post-tax quantity.
  • Compare consumer and producer incidence using the relative burden shown by the two equilibrium prices.

1.3.4.4b - incidence of indirect taxes on consumers and producers question 1

[Maximum number: 1]

The diagram shows the market for a sugar-sweetened drink in Peru. In 2018 Peru's Government imposed an ad valorem tax on sugar-sweetened drinks.

Figure for Question 1.3.4.4b - incidence of indirect taxes on consumers and producers question 1 — Edexcel A-Level Economics AS

Which one of the following shows the value of the consumer incidence of the tax?

A

Sol 94500

B

Sol 126000

C

Sol 220500

D

Sol 228000

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