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A-Level Economics · Indirect tax diagram question

A £4-per-unit tax shifts S to S + tax. Which point on the price axis is the price CONSUMERS now pay?

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The diagram

The answer

Point A. Where S + tax crosses D (point E), read across: £7. Consumers pay £2 more, not the full £4. Consumers pay where the NEW supply curve crosses D — point E, price A = £7. The £4 tax is SPLIT: consumers pay £2 more, producers keep £2 less.

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This is one of 9 questions on the indirect tax diagram — every corner lettered, every wrong answer diagnosed.

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