In 1979 in the UK the marginal rate of income tax imposed on the highest earners was 83% which increased to 98% if income was received from interest or dividends. By 1989 the highest marginal rate was reduced to 40%. Despite this reduction, the tax revenue raised from the highest earners increased substantially.
Which theoretical concept illustrates this relationship between tax rates and tax revenue?

Q: What topic does this question test?

This question tests Fiscal Policy in A-Level Economics (syllabus code 9708). It is worth 1 mark.

Q: Which exam paper is this question from?

This question appeared in the Cambridge A-Level Economics May/June 2017 examination, Paper 3 Variant 3 (9708_s17_qp_33.pdf).

Question

In 1979 in the UK the marginal rate of income tax imposed on the highest earners was 83% which increased to 98% if income was received from interest or dividends. By 1989 the highest marginal rate was reduced to 40%. Despite this reduction, the tax revenue raised from the highest earners increased substantially.
Which theoretical concept illustrates this relationship between tax rates and tax revenue?

Oracle Prep · Accepted Answer

Sign up to Oracle Prep to view the full model answer with examiner insights.

📋 Examiner Report & Trap Analysis

🎯 Mark Scheme Breakdown

Unlock the Examiner's Analysis

About This A-Level Economics Question

Topic

Source

Practice on Oracle Prep

Related Economics Questions