Question 22M.1.SL.TZ0.1b
| Date | May 2022 | Marks available | [Maximum mark: 15] | Reference code | 22M.1.SL.TZ0.1b |
| Level | SL | Paper | 1 | Time zone | TZ0 |
| Command term | Evaluate | Question number | b | Adapted from | N/A |
Using real-world examples, evaluate the effects for stakeholders of a government imposing an indirect tax on a particular good.
[15]
Marks should be allocated according to the paper 1 markbands for May 2022 forward, part B.
Answers may include:
- Terminology: indirect tax, stakeholders
- Explanation: that the tax will shift the supply curve to the left/upwards, increase the price and reduce the quantity demanded/supplied; explanation of the possible consequences for consumers, producers, workers, the government and society as a whole
- Diagram: a demand and supply diagram showing the impact of a shift of the supply curve to the left increasing price and reducing quantity demanded/supplied
- Synthesis (evaluate): the importance of PED and PES, the impact on resource allocation and allocative efficiency, whether the tax is specific or ad valorem, the regressive nature of indirect tax and the extent of the increase in taxation
- Examples: use of real-world examples to show instances of indirect taxes being imposed on goods.
A maximum of [9] should be awarded if only one stakeholder is mentioned.
Examiners should be aware that candidates may take a different approach which, if appropriate, should be rewarded.
N.B. It should be noted that definitions, theory and examples that have already been given in part (a), and then referred to in part (b), should be rewarded.
This was generally well answered by students who produced effective theory-based answers that considered the impact of indirect tax on consumers, producers, government, workers and wider society. The part (b) questions on this new paper 1 have an emphasis on real-world examples and nearly all students attempted to do this. It was good to see answers that looked at the impact of indirect taxation on different markets and in different countries in the world. The strongest responses developed answers that evaluated the effects of indirect taxes on different stakeholders by, for example, considering how the impact of indirect taxation is affected by the price elasticity of demand and supply of a good.
