The role and relative merits of different UK taxes
The UK government raises money through several different taxes. Each tax has a specific role and its own strengths and weaknesses.
Real World
When the UK government raised VAT from 17.5% to 20% in 2011, it collected more revenue but critics argued it hit lower-income households hardest, since they spend a greater share of their income on goods — illustrating the regressive nature of indirect taxes.
Exam Focus
When asked to 'evaluate' a tax, always contrast its revenue-raising ability against its distributional impact using progressive vs regressive.
Price Elasticity of Demand
PED = % change in quantity demanded ÷ % change in price
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