A-LevelEconomicsGovernment microeconomic intervention9708/12 · May/June 2016 · Q121 Mark
The diagram shows the demand curve and supply curve for a good on which the government imposes a specific tax. [Figure X.X] What will be the result of this tax?
This question uses a diagram from the original paper, which isn't shown here. Open the full paper from the past papers archive to see it.
AMost of the incidence of the tax will fall on the producer.
BThere will be a new demand curve parallel to DD.
CThe price will rise by the full amount of the tax.
DThe quantity bought will fall proportionately to the tax rate.
✓ Correct answer
A: Most of the incidence of the tax will fall on the producer.
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