DRAG THE CURVES.
Move demand, flex elasticity, then drop an indirect tax on the market and watch who actually pays it — three live Economics B diagrams you can push around.
Supply & demand · cutting mat
FIG. 01 · MARKETS · 1.3A rightward shift is rising real income, a fashion for the good, or more buyers in the market. Nothing about price has changed.
Flatter curve, bigger response to price. Necessities with no substitutes sit near 0.4; luxuries with plenty of substitutes above 1.5.
Wages, raw materials, an energy bill. Higher costs lift the whole supply curve — a movement of S, not along it.
The market clears where the marginal buyer's willingness to pay equals the marginal seller's cost.
What the exam wants: Theme 1.3 asks you to distinguish a shift of a curve from a movement along it, then explain the new equilibrium. Use the sliders separately: demand shift moves D, the cost shock moves S, the responsiveness slider only changes D's slope. Note that PED is not the slider — it is the elasticity at the equilibrium point, and it changes as you slide along one straight-line demand curve.
Price up, revenue down?
FIG. 02 · ELASTICITY & REVENUE · 1.3 / 2.4Ignore the minus sign and read the size. Below 1 the good is price inelastic; above 1, price elastic.
Baseline: £2.00 a unit, 10,000 units a week — total revenue £20,000.
Unit elastic — revenue does not move.
%ΔQd ≈ −PED × %ΔP = 0.0%
What the exam wants: the PED–revenue rule, applied to a firm's pricing decision. If demand is inelastic, price and revenue move the same way; if elastic, they move in opposite directions; at PED = 1 revenue is unchanged. The exam arithmetic is %ΔQd = PED × %ΔP; this chart draws the exact constant-elasticity curve, which is why revenue sits perfectly flat at 1.00 even for a 40% price change.
Who actually pays the tax?
FIG. 03 · INTERVENTION · 1.5 / 4.2A specific (per-unit) indirect tax: the sugar levy, fuel duty, tobacco duty. It lifts the supply curve vertically by exactly the tax.
Drag this down towards 0.4 — addictive or necessity goods — and watch the consumer's share of the burden climb.
Set a tax to split the burden.
What the exam wants: incidence is decided by relative elasticity. The side of the market that can least easily walk away carries most of the tax, so an inelastic-demand good (fuel, cigarettes) hands the burden to consumers and raises a lot of revenue while barely shrinking quantity — which is exactly why it is a good revenue tax but a weak behaviour-changing one. The red triangle is the welfare loss from trades that no longer happen; it is small when demand is inelastic.