Paper 3 (HL) Model Essays

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  Worked example: from an illustrative price change and quantity data, calculate PED, the change in total revenue and a tax-incidence split, then recommend a pricing or tax decision.IB HL · Paper 3, calculations and policy recommendation · Calculate; Recommend

  This reserved ETG worked example takes an illustrative price rise and the quantity response, calculates the price elasticity of demand step by step, reads off whether demand is elastic or inelastic, traces what that means for total revenue, and splits the burden of an indirect tax between consumers and producers, before recommending a pricing or tax decision from the numbers.

  This reserved worked example builds the full elasticity chain that Paper 3 keeps testing. It starts with an illustrative price change and the quantity demanded before and after, computes the price elasticity of demand using the percentage-change method with the sign and units handled properly, and states clearly whether demand is elastic or inelastic at that point.

  It then carries the elasticity value forward into the decisions that depend on it: what happens to total revenue when price rises, and how the burden of a specific indirect tax splits between consumers and producers when demand is relatively inelastic. The answer finishes with a justified pricing or tax recommendation drawn directly from the calculated figures. The full step-by-step working is reserved for ETG IB classes.

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