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Consider a competitive market, that has recently had an ad valorem sales tax imposed. Show this on a diagram. What is the impact on the market equilibrium? If the demand curve becomes more inelastic, which side of the market suffers more?

An ad valorem sales tax is a percentage tax on the market price of good, normally paid for by the seller. This tax will pull the supply curve up towards the top left corner of a supply and demand curve, with...
JB
Answered by Joseph B. • Economics tutor
3317 Views

Explain the impact that a fall in the world price of oil might have on aggregate supply and gross domestic product (GDP) in an economy.

The first key step to answering this type of IB Economics question is to define the key terms. Aggregate supply is defined as total amount of goods and services that producers of an economy are willing to su...
SD
Answered by Sofia D. • Economics tutor
10310 Views

Is a firm earning abnormal profits in perfect competition productively and allocatively efficient?

To answer this question, it is first very important to define productive efficiency and allocative efficiency. A firm is said to be productively efficient if it produces each good at the lowest possible unit...
TL
Answered by Tom L. • Economics tutor
10274 Views

What is the difference between GDP and GNI and how should I compare them?

The difference between GDP (Gross Domestic Product) and GNI (Gross National Income), lies in the distinction between the notions of ‘national’ and ‘domestic’. GDP measures all output produced within the bord...
MP
Answered by Marco P. • Economics tutor
12778 Views

Discuss the consequences of imposing an indirect tax on a demerit good (unhealthy food)

This is a common question asked in past paper 1s for both SL and HL Economics. To approach this as a 15 marker, one would first define the key terms in the question such as defining a demerit good and indire...
FB
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