The government introduces an indirect tax on each of two types of firework, both of which cause noise disturbance to nearby residents. Each tax raises the price paid by consumers by 10%. Demand for Type A is more price elastic than demand for Type B.
Which outcome is most likely?
A greater percentage fall in sales of Type B because its demand is less price elastic
No fall at all in sales of Type B because its demand is less price elastic
A greater percentage fall in sales of Type A because its demand is more price elastic
The same percentage fall in sales of both types because their prices rise by the same percentage
127 exam-style questions on OCR GCSE Economics 3.8 Limitations of markets, covering 3.8.1 Positive and negative externalities, 3.8.2 Policies to correct externalities, 3.8.3 Impact of externality policies, and 3.8.4 Costs and benefits of externality policies. Each one has a worked solution and a mark scheme showing where the marks go.