Economics (AS & A Level) · Oct / Nov 2021 · Paper 33 · Question 6

The diagrams show changes in a consumer's budget line (BL) for two goods. The government increases the price of both goods by imposing a sales tax of 25%. Which diagram shows the effect of this tax?

1. ADiagram A: BL1 and BL2 with same vertical intercept on good Y axis, BL2 further out on good X axis
2. BDiagram B: BL1 and BL2 with same vertical intercept on good Y axis, BL2 further out on good X axis with steeper slope
3. CDiagram C: BL1 and BL2 with same horizontal intercept on good X axis, BL2 further out on good Y axis
4. DDiagram D: BL1 and BL2 parallel, BL1 further out on both axes

As printed in the paper