Farmers in a country use a chemical fertiliser which can run off fields, reducing fish stocks for anglers downstream. The government introduces an indirect tax of £2 on every 20 kg bag sold.
| Before the tax | After the tax | |
|---|---|---|
| Average price per 20 kg bag | £8.00 | £10.00 |
| Bags sold per year | 8.0 million | 7.6 million |
Using the data, explain why the tax may raise substantial revenue but have only a small effect on the harm to anglers.
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.