Andres, I have seen the optimum price placed below the equilibrium and I don't think it makes sense. For a demerit good, like tobacco, we need a high price i.e. where the MPB=MPC+tax because this is how successive governments have reduced consumption...
Paper 2 question on market failure and indirect taxationThis is an interesting discussion. As I have seen the socially optimal price being placed above, but as you pointed out, that would be with the corrective price. The reason why the socially optimal price is usually seen below (in a negative consumption...
Paper 2 question on market failure and indirect taxationCheck them out now Aparna, there are 5 there to see - 3 grade As, one B and a C for contrast.
Extended essay (new specification)thankyou Mark
Extended essay (new specification)Aparna, we are grading existing essays for the new EE criteria.
Extended essay (new specification)Yes Kennedy, that is correct
Paper 2 question on market failure and indirect taxationHi Aparna, We have used the new criteria to mark an existing essay. New essays have not been written yet, so we can't use an essay written under the new specification. We will be able to do this in the coming months. Thanks, Alex
Extended essay (new specification)Hi, Is there a new sample for EE as per the new criteria's?
Extended essay (new specification)Hi, Alex: For question (c), if my understanding is correct, you placed the optimal price above P1, as this is the corrective or target price, especially if indirect taxes are imposed to reduce or eliminate welfare loss, right? Since the question...
Paper 2 question on market failure and indirect taxation
Kennedy
Exactly, Andres. And lower Qs would somehow force producers to lower the prices to still gain revenue, but I am pointing out the demand of the question here, of showing market failure due to the (over)consumption of tobacco products, instead of production....
Paper 2 question on market failure and indirect taxation