Specification point 1.2.9 · Theme 1
How markets work · Introduction to markets and market failure
Questions tagged to this specification point
29 questions
Long-form evaluation and discussion
Case study · The market for meat and the growth of vegetarianism
Evaluate the likely microeconomic effects of a reduction in subsidies to farmers of animal products (Figure 1 and Extract B, line 14). Use a relevant diagram to support your answer.
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Case study · The market for meat and the growth of vegetarianism
Evaluate the likely microeconomic effects of an increase in indirect tax on animal products (Figure 2 and Extract A, line 17). Use a relevant diagram to support your answer.
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Case study · The market for plastic in the UK
Evaluate the likely impact of a tax on plastic food-packaging. Use a diagram to support your answer.
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Case study · Markets for food and drinks high in fat, salt or sugar (HFSS)
Evaluate the likely microeconomic and macroeconomic effects of imposing a tax on HFSS foods.
Evaluate the likely microeconomic effects of such a tax.
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Questions built around exam extracts
Case study · The economy of India
Using a demand and supply diagram, explain the cost of a subsidy on the market for cooking oil to the Indian government (Extract E, line 6).
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Case study · The market for plastic in the UK
Explain what is meant by the ‘unintended consequence’ (Extract B, line 9) of the plastic tax.
Case study · The UK Rail Industry
Refer to Figure 1. Explain the likely effect of the change in subsidy levels between 2017 and 2018 on rail fares. Include a supply and demand diagram in your answer.
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Case study · Branded coffee shops
Examine the advantages of using an indirect tax as a means of reducing the use of disposable coffee cups.
Focused calculations, explanations and diagrams
Define the term ‘indirect tax’.
Draw a supply and demand diagram to show the incidence of a specific petrol tax on consumers and producers.
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Explain an opportunity cost to the government of granting subsidies to energy suppliers to install loft insulation.
Using an example, explain why the government imposes specific taxes on many goods and services.
On the diagram below annotate the effect of a rise in VAT on the market for household energy use.
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Define the term ‘indirect tax’.
Calculate the weekly revenue received by Camelot after paying the tax to the government. You are advised to show your working.
Calculate the total domestic cooking gas subsidy paid daily by the Indian government. You are advised to show your working.
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Calculate the percentage share of the total subsidy received by consumers.
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Calculate the percentage share of the total subsidy received by producers.
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Define the term ‘subsidies’.
Annotate the diagram below to show the effect of removing the solar panel installation subsidy on the equilibrium price and quantity.
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Quick checks of economic understanding
During the period from October to December 2022, production of coffee beans in the Philippines increased by 2.7% from the same quarter in 2021. Which one of the following is most likely to cause a shift to the right of the supply curve?
Which one of the following is an example of an indirect tax?
The indirect tax on fuel is increased in a market in which the price elasticity of demand is −0.1. Which one of the following is the most likely effect on consumer and producer surplus?
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In the diagram below, the government grants a subsidy to energy suppliers to install loft insulation. This shifts the market supply curve for loft insulation from Supply to Supply . 1 2 Price of loft insulation Supply Supply J P K P P L M P Demand O Q Q Quantity of loft insulation 1 2 The total amount spent by the government on subsidies is represented by the area:
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In the diagram below, the government imposes a specific tax on a product. This shifts the supply curve from Supply to Supply . 1 2 Price Supply H Supply P 1 J P K P Demand O Q Q Quantity 1 2 The government’s tax revenue is shown by the area:
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The amount of VAT paid per year from energy bills by an average household in 2016 was:
One effect of the subsidy is to increase:
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The most likely effect of cutting subsidies for the installation of solar panels is to: