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style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35118/unit-2111-market-power-theory-of-production-and-costs-hl.html" title="Unit 2.11(1) Market power - Theory of production and costs (HL)">Unit 2.11(1) Market power - Theory of production and costs (HL)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35125/unit-2112-market-power-perfect-competitionhl.html" title="Unit 2.11(2) Market power - Perfect competition(HL)">Unit 2.11(2) Market power - Perfect competition(HL)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35147/unit-2113-market-power-monopolyhl.html" title="Unit 2.11(3) Market power - Monopoly(HL)">Unit 2.11(3) Market power - Monopoly(HL)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35151/unit-2114-market-power-monopolistic-competitionhl.html" title="Unit 2.11(4) Market power - Monopolistic competition(HL)">Unit 2.11(4) Market power - Monopolistic competition(HL)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35153/unit-2115-market-power-oligopolyhl.html" title="Unit 2.11(5) Market power - Oligopoly(HL)">Unit 2.11(5) Market power - Oligopoly(HL)</a></li><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../41603/economics-real-world-examples-and-extension-material-.html" title="Economics real world examples and extension material ">Economics real world examples and extension material </a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../43378/opportunity-cost-and-production-possibility-curves.html" title="Opportunity cost and production possibility curves">Opportunity cost and production possibility curves</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../42559/demand-theory.html" title="Demand theory">Demand theory</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../41886/the-price-mechanism.html" title="The price mechanism">The price mechanism</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../43188/market-demand-and-supply.html" title="Market demand and supply">Market demand and supply</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../41705/demerit-goods.html" title="Demerit goods">Demerit goods</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../42275/market-failure-and-climate-change.html" title="Market failure and climate change">Market failure and climate change</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../42925/market-power.html" title="Market power">Market power</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../42099/applying-game-theory.html" title="Applying game theory">Applying game theory</a></li></ul></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../34407/chapter-3-macroeconomics.html" title="Chapter 3: Macroeconomics">Chapter 3: Macroeconomics</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../34355/unit-311-measuring-the-level-of-economic-activity.html" title="Unit 3.1(1): Measuring the level of economic activity">Unit 3.1(1): Measuring the level of economic activity</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../34432/unit-312-measuring-economic-development.html" title="Unit 3.1(2): Measuring Economic Development">Unit 3.1(2): Measuring Economic Development</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../34485/unit-321-variations-in-economic-activity-aggregate-demand-ad-.html" title="Unit 3.2(1): Variations in economic activity - aggregate demand (AD) ">Unit 3.2(1): Variations in economic activity - aggregate demand (AD) </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../34487/unit-322-variations-in-economic-activity-aggregate-supplyas.html" title="Unit 3.2(2): Variations in economic activity - aggregate supply(AS)">Unit 3.2(2): Variations in economic activity - aggregate supply(AS)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../34758/unit-331-macroeconomic-objectives-economic-growth.html" title="Unit 3.3(1) Macroeconomic objectives: economic growth">Unit 3.3(1) Macroeconomic objectives: economic growth</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../34771/unit-332-macroeconomic-objectives-unemployment-.html" title="Unit 3.3(2) Macroeconomic objectives: unemployment ">Unit 3.3(2) Macroeconomic objectives: unemployment </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../34778/unit-333-macroeconomic-objectives-inflation-and-deflation--1.html" title="Unit 3.3(3) Macroeconomic objectives: inflation and deflation ">Unit 3.3(3) Macroeconomic objectives: inflation and deflation </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../34925/unit-341-economics-of-inequality-and-poverty-1.html" title="Unit 3.4(1) Economics of inequality and poverty">Unit 3.4(1) Economics of inequality and poverty</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../34946/unit-342-policies-to-improve-equality-equity-and-poverty.html" title="Unit 3.4(2) Policies to improve equality, equity and poverty">Unit 3.4(2) Policies to improve equality, equity and poverty</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../34993/unit-35-government-management-of-the-economy-monetary-policy-1.html" title="Unit 3.5 Government management of the economy – monetary policy">Unit 3.5 Government management of the economy – monetary policy</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../34962/unit-36-government-management-of-the-economy-fiscal-policy-1.html" title="Unit 3.6 Government management of the economy – fiscal policy">Unit 3.6 Government management of the economy – fiscal policy</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35017/unit-371-market-based-supply-side-policies--1.html" title="Unit 3.7(1) Market based supply-side policies ">Unit 3.7(1) Market based supply-side policies </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35018/unit-372-interventionist-supply-side-policies-.html" title="Unit 3.7(2) Interventionist supply-side policies ">Unit 3.7(2) Interventionist supply-side policies </a></li><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../45803/economics-real-world-examples-and-extension-material--1.html" title="Economics real world examples and extension material ">Economics real world examples and extension material </a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../42639/measuring-economic-well-being-1.html" title="Measuring economic well-being">Measuring economic well-being</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../43044/inflation.html" title="Inflation">Inflation</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../42350/inequality.html" title="Inequality">Inequality</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../41639/inequity-1.html" title="Inequity">Inequity</a></li></ul></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../35414/chapter-4-the-global-economy.html" title="Chapter 4: The Global Economy">Chapter 4: The Global Economy</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35346/unit-41-benefits-of-international-trade-1.html" title="Unit 4.1 Benefits of international trade">Unit 4.1 Benefits of international trade</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35348/unit-4243-trade-protectionism-1.html" title="Unit 4.2/4.3 Trade protectionism">Unit 4.2/4.3 Trade protectionism</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35407/unit-44-economic-integration-.html" title="Unit 4.4 Economic integration ">Unit 4.4 Economic integration </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35409/unit-45-exchange-rates-1.html" title="Unit 4.5 Exchange rates">Unit 4.5 Exchange rates</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35413/unit-46-balance-of-payments--1.html" title="Unit 4.6 Balance of payments ">Unit 4.6 Balance of payments </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35675/unit-47-sustainable-development.html" title="Unit 4.7 Sustainable development">Unit 4.7 Sustainable development</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35685/unit-48-measuring-development--1.html" title="Unit 4.8 Measuring development ">Unit 4.8 Measuring development </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35687/unit-49-barriers-to-economic-development-1.html" title="Unit 4.9 Barriers to economic development">Unit 4.9 Barriers to economic development</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../35702/unit-410-economic-growth-and-economic-development-strategies.html" title="Unit 4.10: Economic growth and economic development strategies">Unit 4.10: Economic growth and economic development strategies</a></li><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../45804/economics-real-world-examples-and-extension-material-.html" title="Economics real world examples and extension material ">Economics real world examples and extension material </a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../41927/foreign-currency-1.html" title="Foreign currency">Foreign currency</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../43532/exchange-rates-1.html" title="Exchange rates">Exchange rates</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../43804/balance-of-payments.html" title="Balance of payments">Balance of payments</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../41796/economic-development-1.html" title="Economic development">Economic development</a></li></ul></ul></ul><li class="ancestor parent std-toplevel" style="padding-left: 4px"><i class="expander fa fa-caret-right fa-rotate-90"></i><a class="" href="../20132/units-1-2-microeconomics.html" title="Units 1-2: Microeconomics">Units 1-2: Microeconomics</a></li><ul class="level-1 expanded"><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="std-disabled" href="#" title="Unit 1: Introduction to economics">Unit 1: Introduction to economics</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20091/introductory-activity-1.html" title="Introductory activity">Introductory activity</a></li><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20093/unit-11-scarcity-choice-and-opportunity-cost.html" title="Unit 1.1: Scarcity, choice and opportunity cost">Unit 1.1: Scarcity, choice and opportunity cost</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../21647/factors-of-production-1.html" title="Factors of production">Factors of production</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20114/economic-systems.html" title="Economic systems">Economic systems</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../20134/public-and-private-sectors-1.html" title="Public and private sectors">Public and private sectors</a></li></ul><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../28055/unit-12-economics-as-a-social-science-1.html" title="Unit 1.2: Economics as a social science">Unit 1.2: Economics as a social science</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29921/circular-flow-of-national-income.html" title="Circular flow of national income">Circular flow of national income</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29829/unit-1-review-terms-1.html" title="Unit 1: Review terms">Unit 1: Review terms</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../41600/introduction-to-economics-crossword-1.html" title="Introduction to economics crossword">Introduction to economics crossword</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../4331/unit-1-multiple-choice-quiz.html" title="Unit 1: Multiple choice quiz">Unit 1: Multiple choice quiz</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20177/unit-21-23-competitive-markets-demand-and-supply-1.html" title="Unit 2.1-2.3: Competitive markets - demand and supply">Unit 2.1-2.3: Competitive markets - demand and supply</a></li><ul class="level-2 "><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../28517/unit-21-demand-1.html" title="Unit 2.1: Demand">Unit 2.1: Demand</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../22349/determinants-of-demand-1.html" title="Determinants of demand">Determinants of demand</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29949/unit-22-supply-.html" title="Unit 2.2: Supply ">Unit 2.2: Supply </a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../20184/changes-to-supply-and-demand-.html" title="Changes to supply and demand ">Changes to supply and demand </a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../21992/practise-exercises-1.html" title="Practise exercises">Practise exercises</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../26112/gold-exchange-game-demand-and-supply-1.html" title="Gold exchange game: Demand and supply">Gold exchange game: Demand and supply</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20194/unit-23-competitive-market-equilibrium-1.html" title="Unit 2.3: Competitive market equilibrium">Unit 2.3: Competitive market equilibrium</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../20144/producer-and-consumer-surplus-1.html" title="Producer and consumer surplus">Producer and consumer surplus</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../22351/veblen-goods-and-super-luxury-goods-1.html" title="Veblen goods and super luxury goods">Veblen goods and super luxury goods</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../25677/are-cryptocurrencies-the-new-tulipmania.html" title="Are Cryptocurrencies the new Tulipmania?">Are Cryptocurrencies the new Tulipmania?</a></li></ul><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20472/unit-21-23-multiple-choice-quiz.html" title="Unit 2.1-2.3: Multiple choice quiz">Unit 2.1-2.3: Multiple choice quiz</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20113/unit-24-consumer-and-producer-behaviour-hl-only-1.html" title="Unit 2.4: Consumer and producer behaviour (HL only)">Unit 2.4: Consumer and producer behaviour (HL only)</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../36073/behavioural-economics-consumer-biases-nudge-theory-hl-only-1.html" title="Behavioural economics: Consumer biases / nudge theory (HL only)">Behavioural economics: Consumer biases / nudge theory (HL only)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20378/business-objectives-hl-only.html" title="Business objectives (HL only)">Business objectives (HL only)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../28741/unit-21-24-review-terms--1.html" title="Unit 2.1-2.4: Review terms ">Unit 2.1-2.4: Review terms </a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20195/unit-25-26-elasticity-1.html" title="Unit 2.5-2.6: Elasticity">Unit 2.5-2.6: Elasticity</a></li><ul class="level-2 "><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../28713/unit-25-price-elasticity-of-demand-1.html" title="Unit 2.5: Price elasticity of demand">Unit 2.5: Price elasticity of demand</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../21545/determinants-of-price-elasticity-.html" title="Determinants of price elasticity ">Determinants of price elasticity </a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../21532/ped-elasticity-and-sales-revenue.html" title="PED elasticity and sales revenue?">PED elasticity and sales revenue?</a></li></ul><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21259/unit-25-income-elasticity-of-demand-yed.html" title="Unit 2.5: Income elasticity of demand (YED)">Unit 2.5: Income elasticity of demand (YED)</a></li><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21200/unit-26-price-elasticity-of-supply.html" title="Unit 2.6: Price elasticity of supply">Unit 2.6: Price elasticity of supply</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../20207/perfectly-elastic-inelastic-supply-curves.html" title="Perfectly elastic / inelastic supply curves">Perfectly elastic / inelastic supply curves</a></li></ul><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20230/a-mathematical-note-about-elasticity-.html" title="A mathematical note about elasticity ">A mathematical note about elasticity </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../39037/demand-and-supply-crossword.html" title="Demand and supply crossword">Demand and supply crossword</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29021/unit-25-26-review-terms-1.html" title="Unit 2.5-2.6: Review terms">Unit 2.5-2.6: Review terms</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20474/unit-25-26-multiple-choice-quiz--1.html" title="Unit 2.5-2.6: Multiple choice quiz ">Unit 2.5-2.6: Multiple choice quiz </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44474/unit-21-25-competitive-markets-quiz-1.html" title="Unit 2.1- 2.5: Competitive markets quiz">Unit 2.1- 2.5: Competitive markets quiz</a></li></ul><li class="ancestor parent" style="padding-left: 14px"><i class="expander fa fa-caret-right fa-rotate-90"></i><a class="" href="../20243/unit-27-the-role-of-government-in-microeconomics--1.html" title="Unit 2.7: The role of government in microeconomics ">Unit 2.7: The role of government in microeconomics </a></li><ul class="level-2 expanded"><li class="ancestor parent" style="padding-left: 28px"><i class="expander fa fa-caret-right fa-rotate-90"></i><a class="" href="../26590/indirect-taxation.html" title="Indirect taxation">Indirect taxation</a></li><ul class="level-3 expanded"><li class="current" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="ped-and-the-burden-of-tax-hl-only-.html" title="PED and the burden of tax (HL only) ">PED and the burden of tax (HL only) </a></li></ul><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20277/government-subsidies--1.html" title="Government subsidies ">Government subsidies </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29117/unit-27-indirect-tax-and-subsidy-review-terms-1.html" title="Unit 2.7: Indirect tax and subsidy review terms">Unit 2.7: Indirect tax and subsidy review terms</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20287/price-controls-maximum-price--1.html" title="Price controls − maximum price ">Price controls − maximum price </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20288/minimum-price-.html" title="Minimum price ">Minimum price </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21540/minimum-wage-.html" title="Minimum wage ">Minimum wage </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../38849/labour-market-crossword-1.html" title="Labour market crossword">Labour market crossword</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29260/unit-27-price-controls-review-terms-1.html" title="Unit 2.7: Price controls review terms">Unit 2.7: Price controls review terms</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20303/unit-28-210-market-failure--1.html" title="Unit 2.8-2.10: Market failure ">Unit 2.8-2.10: Market failure </a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21543/unit-28-merit-goods--1.html" title="Unit 2.8: Merit goods ">Unit 2.8: Merit goods </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../23123/unit-28-demerit-goods-negative-externalities-1.html" title="Unit 2.8: Demerit goods / negative externalities">Unit 2.8: Demerit goods / negative externalities</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../38850/market-failure-crossword-1.html" title="Market failure crossword">Market failure crossword</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29262/unit-29-economics-of-the-environment-and-public-goods--1.html" title="Unit 2.9: Economics of the environment and public goods ">Unit 2.9: Economics of the environment and public goods </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20332/unit-210-asymmetric-information-hl-only-1.html" title="Unit 2.10: Asymmetric information (HL only)">Unit 2.10: Asymmetric information (HL only)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29828/unit-28-210-market-failure-review-sheet.html" title="Unit 2.8-2.10: Market failure review sheet">Unit 2.8-2.10: Market failure review sheet</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29827/unit-28-210-market-failure-review-terms.html" title="Unit 2.8-2.10: Market failure review terms">Unit 2.8-2.10: Market failure review terms</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20479/unit-27-210-multiple-choice-quiz--1.html" title="Unit 2.7-2.10: Multiple choice quiz ">Unit 2.7-2.10: Multiple choice quiz </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44501/unit-27-210-government-failure-revision-quiz-1.html" title="Unit 2.7-2.10 Government failure revision quiz">Unit 2.7-2.10 Government failure revision quiz</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20330/unit-211-market-power-hl-only-1.html" title="Unit 2.11: Market power (HL only)">Unit 2.11: Market power (HL only)</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29835/assessment-map.html" title="Assessment map">Assessment map</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21528/production-hl-only.html" title="Production (HL only)">Production (HL only)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29978/revenue-theory-hl-only.html" title="Revenue theory (HL only)">Revenue theory (HL only)</a></li><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20357/costs-of-production-hl-only.html" title="Costs of production (HL only)">Costs of production (HL only)</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../21286/economies-and-diseconomies-of-scale-hl-only.html" title="Economies and diseconomies of scale (HL only)">Economies and diseconomies of scale (HL only)</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../22494/long-run-average-cost-curves-hl-only.html" title="Long run average cost curves (HL only)">Long run average cost curves (HL only)</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../29838/breakeven-hl-only.html" title="Breakeven (HL only)">Breakeven (HL only)</a></li></ul><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20340/economic-profit-hl-only.html" title="Economic profit (HL only)">Economic profit (HL only)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../39082/market-power-crossword.html" title="Market power crossword">Market power crossword</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../22495/revision-exercise-on-cost-and-revenue-hl-only.html" title="Revision exercise on cost and revenue (HL only)">Revision exercise on cost and revenue (HL only)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29845/unit-211-costs-revenue-and-profit-review-sheet-hl-only.html" title="Unit 2.11: Costs, revenue and profit review sheet (HL only)">Unit 2.11: Costs, revenue and profit review sheet (HL only)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44484/unit-211-multiple-choice-quiz-sl-units-1.html" title="Unit 2.11: Multiple choice quiz (SL units)">Unit 2.11: Multiple choice quiz (SL units)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29846/market-structures-hl-only-1.html" title="Market structures (HL only)">Market structures (HL only)</a></li><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29981/perfect-competition-hl-only-1.html" title="Perfect competition (HL only)">Perfect competition (HL only)</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../24486/profit-in-perfect-competition-hl-only-1.html" title="Profit in perfect competition (HL only)">Profit in perfect competition (HL only)</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../21302/efficiency-in-perfect-competition-hl-only.html" title="Efficiency in perfect competition (HL only)">Efficiency in perfect competition (HL only)</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20430/monopoly-hl-only-1.html" title="Monopoly (HL only)">Monopoly (HL only)</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../24529/profit-and-revenue-maximisation-in-monopoly-hl-only-1.html" title="Profit and revenue maximisation in monopoly (HL only)">Profit and revenue maximisation in monopoly (HL only)</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../21306/a-comparison-of-monopoly-and-perfect-competition-hl-only-1.html" title="A comparison of monopoly and perfect competition? (HL only)">A comparison of monopoly and perfect competition? (HL only)</a></li></ul><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20435/monopolistic-competition-hl-only-1.html" title="Monopolistic competition (HL only)">Monopolistic competition (HL only)</a></li><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20436/oligopoly-hl-only-1.html" title="Oligopoly (HL only)">Oligopoly (HL only)</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../22310/game-theory-hl-only-1.html" title="Game theory (HL only)">Game theory (HL only)</a></li></ul><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29918/unit-211-market-structures-review-sheet-hl-only-1.html" title="Unit 2.11: Market structures review sheet (HL only)">Unit 2.11: Market structures review sheet (HL only)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../32337/unit-211-diagram-revision-.html" title="Unit 2.11: Diagram revision ">Unit 2.11: Diagram revision </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20480/unit-211-multiple-choice-quiz-hl-only-1.html" title="Unit 2.11: Multiple choice quiz (HL only)">Unit 2.11: Multiple choice quiz (HL only)</a></li></ul><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../32425/unit-212-the-markets-inability-to-achieve-equity-hl-only-1.html" title="Unit 2.12: The market’s inability to achieve equity (HL only)">Unit 2.12: The market’s inability to achieve equity (HL only)</a></li></ul><li class=" parent std-toplevel" style="padding-left: 4px"><i class="expander fa fa-caret-right "></i><a class="" href="../21842/unit-3-macroeconomics-.html" title="Unit 3: Macroeconomics ">Unit 3: Macroeconomics </a></li><ul class="level-1 "><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../3942/unit-31-measuring-economic-activity-and-illustrating-its-variati-1.html" title="Unit 3.1: Measuring economic activity and illustrating its variations">Unit 3.1: Measuring economic activity and illustrating its variations</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20558/calculating-national-income-1.html" title="Calculating national income">Calculating national income</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21297/gdp-gni-as-a-measure-of-living-standards.html" title="GDP / GNI as a measure of living standards">GDP / GNI as a measure of living standards</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20567/national-income-statistics-1.html" title="National income statistics">National income statistics</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21580/the-business-cycle-1.html" title="The business cycle">The business cycle</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29931/unit-31-economic-activity-review-sheet-1.html" title="Unit 3.1: Economic activity review sheet">Unit 3.1: Economic activity review sheet</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20592/unit-32-variations-in-economic-activityaggregate-demand-and-aggr-1.html" title="Unit 3.2: Variations in economic activity—aggregate demand and aggregate supply">Unit 3.2: Variations in economic activity—aggregate demand and aggregate supply</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../29933/aggregate-demand-and-supply.html" title="Aggregate demand and supply">Aggregate demand and supply</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21582/components-of-aggregate-demand-1.html" title="Components of aggregate demand">Components of aggregate demand</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20634/equilibrium-in-macroeconomics-neo-classical-perspective-1.html" title="Equilibrium in macroeconomics (neo-classical perspective)">Equilibrium in macroeconomics (neo-classical perspective)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20439/equilibrium-in-macroeconomics-keynesian-perspective-1.html" title="Equilibrium in macroeconomics (keynesian perspective)">Equilibrium in macroeconomics (keynesian perspective)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21349/john-maynard-keynes-1.html" title="John Maynard Keynes">John Maynard Keynes</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20650/keynesian-v-free-market-debate--1.html" title="Keynesian v free market debate ">Keynesian v free market debate </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21342/changes-in-the-long-run-aggregate-supply-1.html" title="Changes in the long run aggregate supply">Changes in the long run aggregate supply</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30055/unit-32-aggregate-demand-and-supply-review-sheet-1.html" title="Unit 3.2: Aggregate demand and supply review sheet">Unit 3.2: Aggregate demand and supply review sheet</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20610/unit-35-and-36-demand-management-fiscal-and-monetary-policy-1.html" title="Unit 3.5 and 3.6: Demand management - fiscal and monetary policy">Unit 3.5 and 3.6: Demand management - fiscal and monetary policy</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30058/government-budget.html" title="Government budget">Government budget</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21585/fiscal-policy--1.html" title="Fiscal policy ">Fiscal policy </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21343/multiplier-hl-only.html" title="Multiplier (HL only)">Multiplier (HL only)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21795/monetary-policy--1.html" title="Monetary policy ">Monetary policy </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30071/independent-central-banks-1.html" title="Independent central banks">Independent central banks</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30083/unit-35-and-36-review-sheet.html" title="Unit 3.5 and 3.6 review sheet">Unit 3.5 and 3.6 review sheet</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20615/unit-37-supply-side-policies-1.html" title="Unit 3.7: Supply side policies">Unit 3.7: Supply side policies</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20651/the-role-of-supply-side-policies-1.html" title="The role of supply side policies">The role of supply side policies</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20622/market-based-and-interventionist-supply-side-policies--1.html" title="Market based and interventionist supply side policies ">Market based and interventionist supply side policies </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../39129/aggregate-demand-and-supply-crossword-1.html" title="Aggregate demand and supply crossword">Aggregate demand and supply crossword</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30086/unit-37-review-sheet-1.html" title="Unit 3.7: Review sheet">Unit 3.7: Review sheet</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20755/unit-31-32-and-35-37-multiple-choice-quiz--1.html" title="Unit 3.1-3.2 and 3.5-3.7: Multiple choice quiz ">Unit 3.1-3.2 and 3.5-3.7: Multiple choice quiz </a></li></ul><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../44522/unit-31-32-and-35-37-revision-quiz-1.html" title="Unit 3.1-3.2 and 3.5-3.7: Revision quiz">Unit 3.1-3.2 and 3.5-3.7: Revision quiz</a></li><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20686/unit-33-macroeconomic-objectives.html" title="Unit 3.3: Macroeconomic objectives">Unit 3.3: Macroeconomic objectives</a></li><ul class="level-2 "><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30118/unemployment.html" title="Unemployment">Unemployment</a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../21351/types-of-unemployment.html" title="Types of unemployment?">Types of unemployment?</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../21593/equilibrium-unemployment-.html" title="Equilibrium unemployment ">Equilibrium unemployment </a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../21594/disequilibrium-unemployment-1.html" title="Disequilibrium unemployment">Disequilibrium unemployment</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../30458/unemployment-review-sheet-1.html" title="Unemployment review sheet">Unemployment review sheet</a></li></ul><li class=" parent" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20713/inflation--1.html" title="Inflation ">Inflation </a></li><ul class="level-3 "><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../20712/measuring-inflation-hl-only-1.html" title="Measuring inflation (HL only)">Measuring inflation (HL only)</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../20685/costs-of-inflation-and-deflation-1.html" title="Costs of inflation and deflation">Costs of inflation and deflation</a></li><li class="" style="padding-left: 42px"><i class="expander fa fa-caret-right "></i><a class="" href="../30465/inflation-review-sheet.html" title="Inflation review sheet">Inflation review sheet</a></li></ul><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20716/unemployment-v-inflation-trade-off-hl-only-1.html" title="Unemployment v inflation trade off (HL only)">Unemployment v inflation trade off (HL only)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../39133/macroeconomic-objectives-crossword-1.html" title="Macroeconomic objectives crossword">Macroeconomic objectives crossword</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../44511/unit-33-macroeconomic-indicators-revision-quiz-1.html" title="Unit 3.3: Macroeconomic indicators revision quiz">Unit 3.3: Macroeconomic indicators revision quiz</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20741/unit-34-economics-of-inequality-and-poverty-1.html" title="Unit 3.4: Economics of inequality and poverty">Unit 3.4: Economics of inequality and poverty</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../32398/inequality-1.html" title="Inequality">Inequality</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21356/the-role-of-spending-and-taxation-on-inequality--1.html" title="The role of spending and taxation on inequality ">The role of spending and taxation on inequality </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21313/consequences-of-economic-growth-1.html" title="Consequences of economic growth">Consequences of economic growth</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30257/economic-growth-and-inequality-review-sheet-1.html" title="Economic growth and inequality review sheet">Economic growth and inequality review sheet</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20756/unit-33-34-multiple-choice-.html" title="Unit 3.3-3.4: Multiple choice ">Unit 3.3-3.4: Multiple choice </a></li></ul></ul><li class=" parent std-toplevel" style="padding-left: 4px"><i class="expander fa fa-caret-right "></i><a class="" href="../21844/unit-4-global-economy.html" title="Unit 4: Global economy">Unit 4: Global economy</a></li><ul class="level-1 "><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../21367/unit-41-benefits-of-international-trade.html" title="Unit 4.1: Benefits of international trade">Unit 4.1: Benefits of international trade</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30529/benefits-of-international-trade.html" title="Benefits of international trade">Benefits of international trade</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20823/absolute-and-comparative-advantage-hl-only-1.html" title="Absolute and comparative advantage (HL only)">Absolute and comparative advantage (HL only)</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20845/unit-42-43-trade-protection-1.html" title="Unit 4.2-4.3: Trade protection">Unit 4.2-4.3: Trade protection</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../32419/barriers-to-trade-calculations-are-hl-only-1.html" title="Barriers to trade (calculations are HL only)">Barriers to trade (calculations are HL only)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21610/case-study-on-tata-steel-1.html" title="Case study on Tata Steel">Case study on Tata Steel</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../23455/the-defence-industry-1.html" title="The Defence industry">The Defence industry</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30610/unit-41-43-review-sheet-1.html" title="Unit 4.1-4.3: Review sheet">Unit 4.1-4.3: Review sheet</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20894/unit-44-economic-integration--1.html" title="Unit 4.4: Economic integration ">Unit 4.4: Economic integration </a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30634/economic-integration-some-hl-tasks-1.html" title="Economic integration (some HL tasks)">Economic integration (some HL tasks)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20840/world-trade-organisation-wto-1.html" title="World trade organisation (WTO)">World trade organisation (WTO)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30635/unit-44-review-sheet-1.html" title="Unit 4.4: Review sheet">Unit 4.4: Review sheet</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20853/unit-45-exchange-rates-1.html" title="Unit 4.5: Exchange rates">Unit 4.5: Exchange rates</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30611/floating-exchange-rates-1.html" title="Floating exchange rates">Floating exchange rates</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../31824/fixed-managed-exchange-rate-systems-some-hl-tasks-1.html" title="Fixed / managed exchange rate systems (some HL tasks)">Fixed / managed exchange rate systems (some HL tasks)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21624/the-market-for-foreign-exchange-1.html" title="The market for foreign exchange">The market for foreign exchange</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30614/unit-45-review-sheet-1.html" title="Unit 4.5: Review sheet">Unit 4.5: Review sheet</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20859/unit-46-balance-of-payments-1.html" title="Unit 4.6: Balance of payments">Unit 4.6: Balance of payments</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30624/balance-of-payments--1.html" title="Balance of payments ">Balance of payments </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21386/current-account-hl-only-1.html" title="Current account (HL only)">Current account (HL only)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20872/the-marshall-lerner-condition-j-curve-hl-only-1.html" title="The Marshall-Lerner condition / J curve (HL only)">The Marshall-Lerner condition / J curve (HL only)</a></li></ul><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20899/units-41-46-multiple-choice-quiz--1.html" title="Units 4.1-4.6: Multiple choice quiz ">Units 4.1-4.6: Multiple choice quiz </a></li><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../42989/unit-41-46-multiple-choice-quiz-ii-1.html" title="Unit 4.1-4.6: Multiple choice quiz II">Unit 4.1-4.6: Multiple choice quiz II</a></li><li class="" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../39438/unit-41-46-international-trade-crossword-1.html" title="Unit 4.1-4.6: International trade crossword">Unit 4.1-4.6: International trade crossword</a></li><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../32423/unit-47-sustainable-development--1.html" title="Unit 4.7: Sustainable development ">Unit 4.7: Sustainable development </a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../26092/water-scarcity-activity-1.html" title="Water scarcity activity">Water scarcity activity</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../32426/sustainable-development.html" title="Sustainable development">Sustainable development</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../20928/unit-48-measuring-development--1.html" title="Unit 4.8: Measuring development ">Unit 4.8: Measuring development </a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30686/measuring-development-1.html" title="Measuring development">Measuring development</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21627/economic-development--1.html" title="Economic development ">Economic development </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30679/unit-47-48-review-sheet.html" title="Unit 4.7-4.8: Review sheet">Unit 4.7-4.8: Review sheet</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="std-disabled" href="#" title="Unit 4.9: Barriers to development">Unit 4.9: Barriers to development</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30727/barriers-to-development-in-international-trade-1.html" title="Barriers to development in International trade">Barriers to development in International trade</a></li></ul><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="" href="../32430/unit-410-economic-growth-andor-economic-development-strategies-1.html" title="Unit 4.10: Economic growth and/or economic development strategies">Unit 4.10: Economic growth and/or economic development strategies</a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30687/the-role-of-domestic-factors-1.html" title="The role of domestic factors">The role of domestic factors</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30688/the-role-of-international-trade-and-development-1.html" title="The role of international trade and development">The role of international trade and development</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30689/the-role-of-foreign-direct-investment-fdi-1.html" title="The role of foreign direct investment (FDI)">The role of foreign direct investment (FDI)</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../25240/the-role-of-foreign-aid--1.html" title="The role of foreign aid ">The role of foreign aid </a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30819/multilateral-development-assistance-1.html" title="Multilateral development assistance">Multilateral development assistance</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../21632/the-role-of-international-debt-1.html" title="The role of international debt">The role of international debt</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../25242/the-balance-between-markets-and-intervention-1.html" title="The balance between markets and intervention">The balance between markets and intervention</a></li><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../30926/unit-49-410-review-sheet.html" title="Unit 4.9 - 4.10: Review sheet">Unit 4.9 - 4.10: Review sheet</a></li></ul></ul><li class=" parent std-toplevel" style="padding-left: 4px"><i class="expander fa fa-caret-right "></i><a class="" href="../21380/assessment.html" title="Assessment">Assessment</a></li><ul class="level-1 "><li class=" parent" style="padding-left: 14px"><i class="expander fa fa-caret-right "></i><a class="std-disabled" href="#" title="Internal assessment ">Internal assessment </a></li><ul class="level-2 "><li class="" style="padding-left: 28px"><i class="expander fa fa-caret-right "></i><a class="" href="../20608/how-to-write-your-ia-student-handout.html" title="How to write your IA? 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<div id="main-column" class="span9"> <article id="ped-and-the-burden-of-tax-hl-only-" style="margin-top: 16px;">
<h1 class="section-title">PED and the burden of tax (HL only) </h1>
<ul class="breadcrumb"><li><a title="Home" href="../../../economics.html"><i class="fa fa-home"></i></a><span class="divider">/</span></li><li><span class="gray">Units 1-2: Microeconomics</span><span class="divider">/</span></li><li><a title="Go to: Unit 2.7: The role of government in microeconomics " href="../20243/unit-27-the-role-of-government-in-microeconomics--1.html">Unit 2.7: The role of government in microeconomics </a><span class="divider">/</span></li><li><a title="Go to: Indirect taxation" href="../26590/indirect-taxation.html">Indirect taxation</a><span class="divider">/</span></li><li><span class="active">PED and the burden of tax (HL only) </span></li></ul>
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<h2><img alt="" src="../../../ib/economics/images/micro-economics-2/tax-burden-1.jpg" style="width: 320px; height: 222px; float: right;">Introduction</h2><p>When an indirect tax is placed on a good or service there is an impact on consumers, producers as well as the government. The impact on each stakeholder depends on the PED for a product. Start this lesson with a TOK exercise. Firstly, ask your classes to write down the goods and services, in their country, which are currently subject to a specific consumption tax. Examples might include petrol, alcohol and tobacco products. Next ask your class to provide the reasons why a government places a tax on those specific goods? The two most likely responses are so that the government can raise tax revenue and reduce consumption of demerit goods. </p><hr class="hidden"><div class="blueBg"><h4><strong>Enquiry question</strong></h4><p>How does the price elasticity of demand and supply for a good or service impact on the incidence of taxation paid by consumers and producers?</p></div><div class="blueBg"><h4>Teacher notes</h4><p><strong>Lesson time: </strong>90 minutes</p><p><strong>Lesson objectives: </strong></p><p>Understanding how to explain, using diagrams, how the incidence of indirect taxes on consumers and firms differs, depending on the price elasticity of demand and on the price elasticity of supply.</p><p>Plot demand and supply curves for a product from linear functions and then illustrate and/or calculate the effects of the imposition of a specific tax on the market (on price, quantity, consumer expenditure, producer revenue, government revenue,<br>consumer surplus and producer surplus) - (HL only).</p><p><strong>Teacher notes:</strong></p><section class="tib-hiddenbox"><p><span style="color:#FF0000;"><strong>1. Beginning activity</strong>, what do you your students know already about this topic? Have them complete this question, listing some of the products that are subject to a specific tax in their country. How does this effect both the selling price of the good / service as well as consumption levels? 15 minutes for this important activity.</span></p><p><span style="color:#FF0000;"><strong>2</strong>. <strong>Processes - technical vocabulary - </strong>The students learn the content reading the <strong>class handout</strong>, which you can print off and activities 1-2, which relate to the specific vocabulary required. Allow 15 minutes for this activity. </span></p><p><span style="color:#FF0000;"><strong>3.</strong> <strong>Reinforcement processes -</strong> the handout includes 5 activities (3 - 7) where students can test their mathematical skills, calculating PED for example, given a set of data provided, as well as short answer responses where they can apply their knowledge. (30 minutes) It is worth stopping your classes for a moment on activity three and draw attention to the fact that many products which are subject to high levels of taxation - cigarettes and alcohol e.t.c. are PED inelastic. What does this mean for the government in terms of the level of tax revenue collected?</span></p><p><span style="color:#FF0000;"><strong>4. </strong></span><span style="color:#FF0000;"><strong>Reflection</strong> <strong>activity -</strong> this activity starts with a video and students should then make notes under the headings provided. The aim of this exercise is for your classes to consider how the effectiveness of a sales tax can be judged. (10 minutes)</span></p><p><strong><span style="color:#FF0000;">5. Link to the assessment - </span></strong><span style="color:#FF0000;">this page contains a relevant paper one style question on this topic, which your students can read and draw a plan for completion. Time allowed for this activity could be anything between 10 minutes and 20.</span></p><p><span style="color:#FF0000;"><strong>6. Homework exercise - </strong>the included homework / revision exercise is a part (a) paper one style question. A mark scheme is included.</span></p></section></div><div class="pinkBg"><h4>1. Beginning question</h4><p>What goods and services are subject to a specific tax in your country? Why does the government choose to tax these particular products? What happens to the price that consumers pay when a tax is placed on a good or service and how will this impact on demand for the product? </p></div><section class="tib-hiddenbox"><p><span style="color:#FF0000;">Governments collect tax for two primary reasons. The first is to reduce consumption of undesirable goods and services. Examples of this include petrol for personal cars, alcohol and tobacco products. However, they also wish to collect as much tax revenue as possible. In this scenario governments may be more inclined to place an indirect tax on a good or service with inelastic PED as the revenue collected will be greater. This is illustrated by the observation that </span><span style="color:#FF0000;">many of the products typically taxed by governments e.g. petrol, cigarettes and alcohol are also PED inelastic. The level of tax revenue collected is surely a factor in any decision.</span></p></section><div class="greenBg"><h4><em>Key terms:</em></h4><p><strong>Price elasticity of demand (PED) </strong>- A measure of the responsiveness of quantity demanded to changes in price.</p><p><strong>Price elasticity of supply (PES) </strong>- A measure of the responsiveness of quantity supplied to changes in price.</p><p><strong>Incidence of taxation </strong>- the share of tax paid paid by both the consumer, in the form of higher prices / lower consumer surplus and the share paid by the producer in the form of lost sales and lower producer surplus.</p></div><div class="blueBg"><h4><strong>Important note about PES elasticity and the burden of tax</strong></h4><p>While it is quite normal to focus on the importance of PED in determining the burden of tax paid by both consumers and producers, PES is also relevant. The relationship can be summarised as follows:</p><p><em><u>When the PES of a good or service is more elastic than demand</u>, it is the consumer that has the greater tax burden.</em></p><p><em>In incidences where the PED of a product is more elastic than supply, producers have the greater tax burden.</em></p></div><p>The handout and activities can be accessed as a PDF file at: <a href="../../../media/ib/economics/files/micro-economics/ped-and-tax-activities.pdf.html" target="_blank" title="Activities"><img class="ico" src="../../../thinkib/icons/activities.png"> PED and tax activities</a> </p><div class="pinkBg"><h4><strong><img alt="" src="../../../ib/economics/images/micro-economics/ped-inelastic-good-before-tax.jpg" style="width: 320px; height: 320px; float: right;">Activity 1: Understanding the relationship between PED and the burden of taxation</strong></h4><p>Diagram one illustrates the market for a product with unitary PES and inelastic PED - PES > PED.</p><p>(a) Illustrate the impact of a specific (flat rate) tax on the good, indicating the size of the indirect tax.</p><p>(b) Draw the new equilibrium price and quantity. </p><p>(c) Illustrate the burden of tax paid by both the producer and the consumer.</p><section class="tib-hiddenbox"><p><img alt="" src="../../../ib/economics/images/micro-economics/tax-unit.png" style="width: 320px; height: 231px; float: left;"></p></section><p>(d) Which stakeholder pays the higher tax burden - the producer or the consumer? Explain your answer.</p><section class="tib-hiddenbox"><p><span style="color:#FF0000;">Diagram 1 represents a PED inelastic good, meaning that any initial change in price has a smaller than proportional impact on quantity demanded. Here the burden of the tax falls primarily on the consumer, because very few consumers stop purchasing the good and simply, reluctantly, pay the extra cost of the good. </span></p><p><span style="color:#FF0000;">After all everyone needs to eat, drive their car and heat their homes to a comfortable level. </span></p></section></div><div class="pinkBg"><h4><strong><img alt="" src="../../../ib/economics/images/micro-economics/ped-elastic-before-tax.jpg" style="width: 320px; height: 320px; float: left;">Activity 2</strong></h4><p>Diagram two illustrates the market for a product with unitary PES and elastic PED - PES < PED.</p><p>(a) Illustrate the impact of a specific (flat rate) tax on the good, indicating the size of the indirect tax.</p><p>(b) Draw the new equilibrium price and quantity. </p><p>(c) Illustrate the burden of tax paid by both the producer and the consumer.</p><section class="tib-hiddenbox"><p><img alt="" src="../../../ib/economics/images/micro-economics/tax-incidence-elastic.png" style="width: 320px; height: 231px; float: right;"></p></section><p>(d) Which stakeholder pays the higher tax burden - the producer or the consumer? Explain your answer.</p><section class="tib-hiddenbox"><p><span style="color:#FF0000;">In this example, most of the burden of taxation falls on the producer, as many consumers will simply respond to the higher price by not purchasing it. Unlike our good in diagram one the producer cannot simply pass the majority of the additional production cost onto the consumer. </span></p></section></div><div class="pinkBg"><h4><b>Activity 3</b></h4><p>(a) The table below includes a list of products that many government apply specific taxes to.<span style="mso-spacerun:yes"> </span>Complete the table, describing whether the product is PED elastic, PED inelastic or has unitary elasticity?<span style="mso-spacerun:yes"> </span>What do you notice about the PEDs of the products that you have identified?</p><table height="173" width="752"><tbody><tr><td style="text-align: center;"><strong>Good or service</strong></td><td style="text-align: center;"><strong>PES</strong></td><td style="text-align: center;"><strong>PED</strong></td><td style="text-align: center;"><strong>Tax primarily paid by the producer or consumer</strong></td></tr><tr><td style="text-align: center;">Cigarettes / tobacco products</td><td><section class="tib-hiddenbox"><p><span style="color:#FF0000;">Elastic</span></p></section></td><td><section class="tib-hiddenbox"><p><span style="color:#FF0000;">Inelastic</span></p></section></td><td><section class="tib-hiddenbox"><p><span style="color:#FF0000;">Consumer in the form of higher prices and lost consumer surplus</span></p></section></td></tr><tr><td style="text-align: center;">Alcoholic beverages</td><td><section class="tib-hiddenbox"><p><span style="color:#FF0000;">Elastic</span></p></section></td><td><section class="tib-hiddenbox"><p><span style="color:#FF0000;">Inelastic</span></p></section></td><td><section class="tib-hiddenbox"><p><span style="color:#FF0000;">Consumer <span style="color:#FF0000;">in the form of higher prices and lost consumer surplus</span></span></p></section></td></tr><tr><td style="text-align: center;">Petrol / fuel</td><td><section class="tib-hiddenbox"><p><span style="color:#FF0000;">Relatively inelastic</span></p></section></td><td><section class="tib-hiddenbox"><p><span style="color:#FF0000;">Inelastic</span></p></section></td><td><section class="tib-hiddenbox"><p><span style="color:#FF0000;">Consumer <span style="color:#FF0000;">in the form of higher prices and lost consumer surplus</span></span></p></section></td></tr><tr><td style="text-align: center;">Concert tickets</td><td><section class="tib-hiddenbox"><p><span style="color:#FF0000;">Perfectly inelastic</span></p></section></td><td><section class="tib-hiddenbox"><p><span style="color:#FF0000;">elastic</span></p></section></td><td><section class="tib-hiddenbox"><p><span style="color:#FF0000;">Only the producer through lost sales</span></p></section></td></tr><tr><td style="text-align: center;">Sugary drinks / fast foods</td><td><section class="tib-hiddenbox"><p><span style="color:#FF0000;">Elastic</span></p></section></td><td><section class="tib-hiddenbox"><p><span style="color:#FF0000;">Inelastic</span></p></section></td><td><section class="tib-hiddenbox"><p><span style="color:#FF0000;">Consumer in the form of higher prices and lost consumer surplus</span></p></section></td></tr></tbody></table><p>(b) Draw a flat rate tax on the diagrams below, shifting the supply curves to the left (the new supply should be drawn parallel to the original supply curve).</p><p><img alt="" src="../../../ib/economics/images/micro-economics/ped-elastic-before-tax.jpg" style="width: 300px; height: 300px;"> <img alt="" src="../../../ib/economics/images/micro-economics/ped-inelastic-good-before-tax.jpg" style="width: 300px; height: 300px;"></p><p>(c) Indicate the tax revenue collected for each product. What do you notice about the two diagrams? If you have draw each correctly then the level of tax collected should be greater for the PED inelastic diagram?</p></div><section class="tib-hiddenbox"><p><strong>Hint:</strong></p><p><span style="color:#FF0000;">While governments will regularly comment that the high level of sales tax on products such as tobacco, alcohol and petrol is in the public interest as the tax is important to regulate and restrict sales of those products, many of you should have also noted that these products are highly price inelastic, meaning that the government receives significant revenue from taxing those goods. </span></p></section><div class="pinkBg"><h4><strong>Activity 4</strong></h4><p><em>Watch the following short video before answering the questions that follow:</em></p><p style="text-align: center;"><iframe allowfullscreen="" frameborder="0" height="360" src="//www.youtube.com/embed/ylWfLX1B9Zo" width="640"></iframe></p><p>1. Calculate the level of tax paid (per unit) at the following prices: $ 40, $ 60, $ 90, $ 135, $ 195, $ 270 when the rate of sales tax is 17.5%.</p><section class="tib-hiddenbox"><p><span style="color:#FF0000;">$ 40 - $7</span></p><p><span style="color:#FF0000;">$ 60 - $ 10.50</span></p><p><span style="color:#FF0000;">$ 90 - % 15.75</span></p><p><span style="color:#FF0000;">$ 135 - $ 23.63</span></p><p><span style="color:#FF0000;">$ 195 - $ 34.13</span></p><p><span style="color:#FF0000;">$ 270 - $ 42.75</span></p></section></div><div class="pinkBg"><h4><strong>Activity 5</strong></h4><p>(a) Use the information contained in the diagram below to calculate the values in questions i-iv</p><p><img alt="" src="../../../ib/economics/images/micro-economics/ped-and-tax-burden-1.jpg" style="width: 320px; height: 320px; float: right;"></p><ul><li>Government revenue</li></ul><section class="tib-hiddenbox"><p><span style="color:#FF0000;">(40-20) x 1,500 = $30,000</span></p></section><ul><li>Producer Revenue</li></ul><section class="tib-hiddenbox"><p><span style="color:#FF0000;">20 x 1,500 = $ 30,000</span></p></section><ul><li>Revenue Loss</li></ul><section class="tib-hiddenbox"><p><span style="color:#FF0000;">(30 x 2,000) - 30,000 = $ 30,000</span></p></section><ul><li>Deadweight welfare loss</li></ul><section class="tib-hiddenbox"><p><span style="color:#FF0000;">((40-20) x (2,000-1,500)) / 2 = $ 5,000</span></p></section><p>(b) Use the information contained in the diagram below to calculate the values in questions i-iv</p><ul><li><img alt="" src="../../../ib/economics/images/micro-economics/ped-and-tax-burden-2.jpg" style="width: 320px; height: 320px; float: left;">Government revenue</li></ul><section class="tib-hiddenbox"><p><span style="color:#FF0000;">(50-25) x 800 = $ 20,000</span></p></section><ul><li>Producer Revenue</li></ul><section class="tib-hiddenbox"><p><span style="color:#FF0000;">25 x 800 = $ 20,000</span></p></section><ul><li>Revenue Loss</li></ul><section class="tib-hiddenbox"><p><span style="color:#FF0000;">(30 x 1,000) - (25 x 800) = $ 10,000</span></p></section><ul><li>Deadweight welfare loss</li></ul><section class="tib-hiddenbox"><span style="color:#FF0000;">((50-25) x (1,000-800)) / 2 = $ 2,500</span></section></div><div class="pinkBg"><h4><img alt="" src="../../../ib/economics/images/micro-economics-2/pexels-photo-27497-medium.jpg" style="width: 320px; height: 200px; float: right;" title="image: https:www.pexels.com"><strong>Activity 6</strong></h4><p>In the EU, as in other parts of the world, governments have used indirect taxes as part of an overall policy to reduce the number of car journeys. This forms part of an overall strategy to reduce traffic congestion and reduce the number of people involved in road accidents. Interestingly the amount of tax revenue collected from taxes on fuel is between 3 to 4 times higher than the tax revenue collected from a sales tax on new car sales. Suggest possible reasons for this?</p></div><section class="tib-hiddenbox"><p><span style="color:#FF0000;">There may be a number of reasons but a significant one is surely the relative price elasticity of the two products. Cars are a luxury good and so are PED elastic. A tax on cars would raise very little tax revenue but would have a significant impact on the car industry. By contrast a tax on fuel generates a lot of tax revenue as fuel is PED inelastic (a necessity good for all car owners).</span></p></section><div class="pinkBg"><h4><strong>Activity 7</strong></h4><p>The UK has one of the highest prices of tobacco in Europe, as highlighted by the following table:</p><table border="1" cellpadding="0" cellspacing="0"><tbody><tr><td style="width:154px;"><p align="center"><strong>Fiscal year</strong></p></td><td style="width:141px;"><p align="center"><strong>Price of cigarettes £ (pack of 20) </strong></p></td><td style="width:152px;"><p align="center"><strong>Total cigarette sales (b)</strong></p></td><td style="width:169px;"><p align="center"><strong>PED of cigarettes</strong></p></td></tr><tr><td style="width:154px;"><p align="center">2012 - 13</p></td><td style="width:141px;"><p align="center">7.72</p></td><td style="width:152px;"><p align="center">38.5</p></td><td style="width: 169px; text-align: center;">-</td></tr><tr><td style="width:154px;"><p align="center">2013 - 14</p></td><td style="width:141px;"><p align="center">8.23</p></td><td style="width:152px;"><p align="center">37</p></td><td style="width:169px;"><section class="tib-hiddenbox"><p style="text-align: center;"><span style="color:#FF0000;">3.9 / 6.6 = 0.59</span></p></section></td></tr><tr><td style="width:154px;"><p align="center">2014 - 15</p></td><td style="width:141px;"><p align="center">9.16</p></td><td style="width:152px;"><p align="center">35.3</p></td><td style="width:169px;"><section class="tib-hiddenbox"><p style="text-align: center;"><span style="color:#FF0000;">4.6 / 11.3 = 0.41</span></p></section></td></tr><tr><td style="width:154px;"><p align="center">2015 - 16</p></td><td style="width:141px;"><p align="center">9.40</p></td><td style="width:152px;"><p align="center">35.1</p></td><td style="width:169px;"><section class="tib-hiddenbox"><p style="text-align: center;"><span style="color:#FF0000;">0.57 / 2.62 = 0.22</span></p></section></td></tr><tr><td style="width:154px;"><p align="center">2016 - 17</p></td><td style="width:141px;"><p align="center">9.91</p></td><td style="width:152px;"><p align="center">34.2</p></td><td style="width:169px;"><section class="tib-hiddenbox"><p style="text-align: center;"><span style="color:#FF0000;">2.56 / 5.42 = 0.47</span></p></section></td></tr><tr><td style="width:154px;"><p align="center">2017 - 18</p></td><td style="width:141px;"><p align="center">10.7</p></td><td style="width:152px;"><p align="center">32.6</p></td><td style="width:169px;"><section class="tib-hiddenbox"><p style="text-align: center;"><span style="color:#FF0000;">4.68 / 7.97 = 0.59</span></p></section></td></tr></tbody></table><p>(a) Calculate the PED for cigarettes from the information provided above and comment on your findings.</p><section class="tib-hiddenbox"><p><span style="color:#FF0000;">Unsurprisingly, cigarette consumption in the UK appears to be PED inelastic, reducing the effectiveness of the governments attempts to cut consumption rates.</span></p></section><table border="1" cellpadding="0" cellspacing="0"><tbody><tr><td style="width:187px;"><p align="center"><strong>Fiscal year</strong></p></td><td style="width:189px;"><p align="center"><strong>Revenue generated (£b)</strong></p></td><td style="width:236px;"><p align="center"><strong>Lost revenue from illegal tobacco sales (£b)</strong></p></td></tr><tr><td style="width:187px;"><p align="center">2012 - 13</p></td><td style="width:189px;"><p align="center">9.7</p></td><td style="width:236px;"><p align="center">2.8</p></td></tr><tr><td style="width:187px;"><p align="center">2013 - 14</p></td><td style="width:189px;"><p align="center">9.5</p></td><td style="width:236px;"><p align="center">3.0</p></td></tr><tr><td style="width:187px;"><p align="center">2014 - 15</p></td><td style="width:189px;"><p align="center">9.5</p></td><td style="width:236px;"><p align="center">2.3</p></td></tr><tr><td style="width:187px;"><p align="center">2015 - 16</p></td><td style="width:189px;"><p align="center">9.5</p></td><td style="width:236px;"><p align="center">3.0</p></td></tr><tr><td style="width:187px;"><p align="center">2016 - 17</p></td><td style="width:189px;"><p align="center">8.9</p></td><td style="width:236px;"><p align="center">3.1</p></td></tr></tbody></table><p>(b) Highlight the challenges faced by illegal cigarette sales to governments trying to collect sales revenue as well as reduce the consumption of tobacco sales.</p></div><section class="tib-hiddenbox"><span style="color:#FF0000;">The scale of illegal cigarette consumption makes it difficult for the UK government to impose more punitive taxation on the product.</span></section><div class="pinkBg"><h4><strong>Activity 8: Reflection</strong></h4><p>Start by watching the following short video before making notes under the headings which follow.</p><p style="text-align: center;"><iframe allowfullscreen="" frameborder="0" height="360" src="//www.youtube.com/embed/KsmcQZ1mA9A" width="640"></iframe></p><p><em>Factors to consider when considering the effectiveness of a tax on tobacco:</em></p><ul><li>What are the potential unintended consequences of the tax?</li></ul><section class="tib-hiddenbox"><p><span style="color:#FF0000;">Impacts on third parties, sellers of tobacco products and bars, consumption habits e.t.c</span></p></section><ul><li>How much tax revenue will be generated and what it will be used for?</li></ul><section class="tib-hiddenbox"><p><span style="color:#FF0000;">Taxing a PED inelastic good such as tobacco raises sufficient funds to provide public services e.g. taxing cars to pay for improvements in public transport or taxing tobacco and junk food to pay for improved health care.</span></p></section><ul><li>What is the impact of the tax on businesses?</li></ul><section class="tib-hiddenbox"><p><span style="color:#FF0000;">A tax imposes additional costs on businesses and higher costs on the consumer. The % burden depends on the relative PES and PED elasticity of the product.</span></p></section><ul><li>What are the consequences for income equality / income distribution?</li></ul><section class="tib-hiddenbox"><p><span style="color:#FF0000;">Sales taxes are generally regressive and hurt families on low incomes more than the wealthy.</span></p></section></div><div class="greenBg"><div><h4><strong><img alt="" src="../../../ib/economics/images/micro-economics-2/gallery-img-lababineau-6.102405_640x496.jpg" style="width: 300px; height: 233px; float: left;">Activity 9: Link to the assessment</strong></h4><p><strong>Part (a)</strong></p><p>Explain how the incidence of an indirect tax depends on the relative price elasticity of demand and price elasticity of supply for the product.<em> [10 marks]</em></p><section class="tib-hiddenbox"><div><p><strong><span style="color:#FF0000;">Command term: Explain</span></strong></p><p><span style="color:#FF0000;"><strong>Key terms: </strong><em>PED, PES, incidence of tax</em></span></p><p><span style="color:#FF0000;"></span><span style="color:#FF0000;">The relationship can be explained as follows:</span></p><p><span style="color:#FF0000;">When the PES of a good or service is more elastic than its PED, it is the consumer that has the greater tax burden.</span></p><p><span style="color:#FF0000;">In incidences where the PED of a product is more elastic than the PES, producers have the greater tax burden.</span></p><p><span style="color:#FF0000;"></span></p></div></section><p><strong>Part (b)</strong></p><p>Using real world examples, discuss the consequences of a government imposing an indirect sugar tax on unhealthy food and beverages. <em>[15 marks]</em></p><section class="tib-hiddenbox"><div><p><span style="color:#FF0000;"></span><strong><span style="color:#FF0000;"><img alt="" src="../../../ib/economics/images/micro-economics-2/coke.png" style="width: 320px; height: 325px; float: right;" title="cokestore.com">Command term: Discuss</span></strong></p><p><span style="color:#FF0000;">The command term is <u>discuss</u> which means that responses must address all sides of this argument, for example both the short and long term impact on consumption of the sugar tax. Many unhealthy foods and beverages are addictive and so PED inelastic in the short run. Supporters of this policy hoping to see an immediate fall in consumption rates will be disappointed. However, it is more likely to be effective in the long run as consumer habits change over time. Sugar taxes have been applied in a small number of countries including UK, Mexico, France and Norway. </span></p><p><span style="color:#FF0000;">Another advantage of the tax is that the tax revenue can be used to fund healthy eating programmes or community sport as is the case in some of those nations that have implemented the tax.</span></p><p><span style="color:#FF0000;">However, a sugar tax has its critics, for instance some have called the tax a tax on the poor - sales taxes are regressive. There are also critics who argue that such a policy is an infringement on a consumer's right to choose what to consume.<span style="color:#FF0000;">Governments collect tax for two primary reasons. The first is to reduce consumption of undesirable goods and services. Examples of this include petrol for personal cars, alcohol and tobacco products. However, they also wish to collect as much tax revenue as possible. In this scenario governments may be more inclined to place an indirect tax on a good or service with inelastic PED as the revenue collected will be greater. </span></span></p></div></section></div></div><div class="pinkBg"><h4>10. Homework / revision exercise</h4><p>Using appropriate diagrams, explain how the relative PED and PES for a product determines the burden of indirect taxation on producers and consumers. <em>[10 marks]</em></p></div><section class="tib-hiddenbox"><p><img alt="" height="226" src="../../../ib/economics/images/micro-economics/tax-incidence-elastic.png" style="float: right;" width="328"><span style="color:#FF0000;"><u>Key terms to define</u>: <em>indirect tax, price elasticity of demand and price elasticity of supply. </em></span></p><p><span style="color:#FF0000;"><em>Responses should also include:</em></span></p><p><span style="color:#FF0000;">Diagrams showing products with different PED elasticity and an explanation of how this impacts on the proportion of sales tax paid by both consumers and producers - in incidences where the PED elasticity for a good is higher than PES, the incidence of the tax falls primarily on the producer. </span></p><p><span style="color:#FF0000;">When a good has a lower PED than PES, the incidence of the tax falls primarily on the consumer.</span></p><p><span style="color:#FF0000;">An explanation that a sales tax will raise the selling price of a good or service and the producer will try to pass on the burden of the tax towards the consumer in the form of higher prices. Firms producing goods and services where the PED is greater than the PES will find this difficult as the consumer reduces their consumption significantly in response to a rise in price. This should be illustrated with a diagram (above and to the right), showing a left shift in the supply curve and a significant reduction in quantity demanded. Responses should also show on their diagram that the burden paid by the producer is greater than that paid by the consumer. </span></p><p><span style="color:#FF0000;">Sales will also fall for goods and services where the PED is smaller than the PES but by a smaller amount, forcing consumers to pay most of the burden through higher prices. Illustrated by the diagram below and to the left.</span></p><p><span style="color:#FF0000;">Responses should then describe how the burden of tax paid by both producers and consumers is equal for goods and services where the PED of the product = it's PES - diagram below and to the right.</span></p><p><span style="color:#FF0000;">Responses should also include examples of goods with different price elasticity of demand.</span></p><div class="row-fluid"><div class="span6"><p><img alt="" height="219" src="../../../ib/economics/images/micro-economics/tax-unit.png" style="float: left;" title="image: //www.boundless.com" width="304"></p></div><div class="span6"><p><img alt="" height="227" src="../../../ib/economics/images/micro-economics/distribution-of-tax-burden.png" width="263"></p></div></div><p> <strong>Responses for section (a) should be graded according to the following mark bands:</strong></p><p>Maximum mark for this section 10.</p><section><table border="1" cellpadding="0" cellspacing="0" height="1289" width="828"><tbody><tr><td><p align="center"><strong>Level</strong></p></td><td><p align="center"><strong>Description</strong></p></td><td><p align="center"><strong>Mark</strong></p></td></tr><tr><td><p align="center">0</p></td><td><p>The response is below the minimum standards described below.</p></td><td><p align="center">0</p></td></tr><tr><td><p align="center">1</p></td><td><p>Demerit goods, externalities and specific sales taxes are not defined or are defined incorrectly. </p><p>The response fails to include a relevant diagram, illustrating the welfare loss resulting from over consumption of car journeys in the city, or the diagram is unclear / inaccurate.</p><p>The response provides only a basic understanding of how the imposition of a specific tax can reduce the number of car journeys.</p><p>The concepts of MSC, MPC or socially optimum output are not included in the response or are explained poorly.</p><p>The response contains significant errors.</p></td><td><p align="center">1 - 3</p></td></tr><tr><td><p align="center">2</p></td><td><p>At least two of demerit goods, externalities or specific sales taxes are defined correctly. </p><p>The response includes a relevant diagram, showing that a specific sales tax will reduce supply but the area of welfare loss or socially optimum output level is missing or unclear.</p><p>The response provides a limited understanding of how the imposition of a specific tax reduces the number of car journeys. For example the response might state that increasing taxes will reduce the supply of cars in the city but not use economic terminology.</p><p>The response contains some minor errors.</p></td><td><p align="center">4 - 6</p></td></tr><tr><td><p align="center">3</p></td><td><p>Demerit goods, externalities and specific sales taxes are accurately defined. </p><p>The response includes a relevant diagram, with MSC, MPC, welfare loss and the socially optimum output level included. The diagram is dynamic, illustrating a left shift in supply and illustrates how the imposition of a specific tax can reduce the number of car journeys made in a city.</p><p>The diagram is explained and answers the specific requirements of the question.</p><p>The response contains some minor errors.</p></td><td><p align="center">7 - 8</p></td></tr><tr><td><p align="center">4</p></td><td><p>Demerit goods, externalities and specific sales taxes are accurately defined. </p><p>The response includes a correctly labelled diagram, showing a left shift in supply and includes MSC, MPC, welfare loss and the socially optimum output level.</p><p>The diagram and following explanation clearly illustrates how the imposition of a specific tax can reduce the number of car journeys made in a city.</p><p>The response skilfully applies relevant economic theory to the question.</p><p>The response includes alternative policies that a government may employ to reduce pollution e.g. legislation or improved public transport links.</p><p>Any errors are minor and do not detract from the overall quality of the response.</p></td><td><p align="center">9 - 10</p></td></tr></tbody></table></section></section><p>The question can be accessed at: <a href="../../../media/ib/economics/files/other-markschemes/tax-and-elasticity-homework-question.pdf.html" target="_blank" title="Worksheets"><img class="ico" src="../../../thinkib/icons/exercise.png"> Question on tax and PED</a></p><p>The question and mark scheme are available as a PDF at: <a href="../../../media/ib/economics/files/micro-economics/markscheme-on-tax-incidence-and-elasticity.pdf.html" target="_blank" title="Worksheets"><img class="ico" src="../../../thinkib/icons/exercise.png"> Revision exercise on tax and PED</a></p><script>document.querySelectorAll('.tib-teacher-only').forEach(e => e.remove());</script>
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