(a)[8]
Explain what is meant by consumer surplus and use diagrams to assess the effect on consumer surplus when an indirect tax is imposed on a good with price-elastic demand compared with the effect when demand is price-inelastic.
(b)[12]
A government is considering whether to use maximum price legislation in the market for food or to offer food subsidies to reduce hunger during a time of food shortages. Discuss whether maximum price legislation or food subsidies are more likely to alleviate hunger in these circumstances.