Unit 1 - Introduction to markets and market failure
Exam (elaborations)
1.2 How Markets Work- A level Economics Edexcel Exam Questions
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Course
Unit 1 - Introduction to markets and market failure
Institution
PEARSON (PEARSON)
Memorsing content can only take you so far, so use exam questions effectively to prepare yourself for the actual exam. This document will help you do so, it contains exam questions for this spec point. [A Level Economics Edexcel A, Exam Questions]
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Question 1a
Fuel duty is an excise tax imposed on the sale of petrol, included in the price paid by consumers, set at 58 pence per litre.
(Source: https://www.gov.uk/tax-on-shopping/fuel-duty)
(a)
Draw a supply and demand diagram to show the incidence of a specific petrol tax on consumers and producers.
[1 mark]
Question 1b
(b)
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?
A. Consumer surplus and producer surplus both decrease
B. Consumer surplus and producer surplus both increase
C. Consumer surplus decreases and producer surplus increases
D. Consumer surplus increases and producer surplus decreases
[1 mark]
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