How to Draw the IB Economics Tax Diagram (Full Marks Guide)

No diagram = no top marks. This is non-negotiable in IB Economics.

Below is the exact step-by-step method examiners expect. Follow it every time and you'll earn full marks for the diagram.

Step 1: Draw demand and supply

1. Draw two axes: vertical = Price (P), horizontal = Quantity (Q)
2. Draw demand curve downward sloping, label it D
3. Draw supply curve upward sloping, label it S
4. Mark the original equilibrium: P1 and Q1

Step 2: Shift the supply curve

The tax is imposed on producers, so the supply curve shifts upward (to the left) by the amount of the tax.

• Draw a new, parallel supply curve above the original
• Label it S + tax or S1 (if you use S1, explain it's the new supply curve after tax)

Step 3: Mark the new equilibrium

Where the demand curve intersects the new supply curve (S + tax):

• Mark on price axis: Pc (price consumers pay) — HIGHER
• Mark on price axis: Pp (price producers receive) — LOWER
• Mark on quantity axis: Qt (new quantity) — LOWER

The vertical distance between them = the tax per unit. This distance should equal the size of the supply shift.

Step 4: Shade the tax revenue rectangle

Draw a rectangle (shaded in light colour) showing tax revenue:

• Top edge: at Pc (price consumers pay)
• Bottom edge: at Pp (price producers receive)
• Width: Qt (new quantity)
• Height: Pc − Pp (the tax per unit)

Label this area: "Tax revenue" or just "TR" so the examiner knows you understand what it represents.

Step 5: Shade the deadweight loss triangle

To the right of Qt, between the demand and new supply curves, draw a small triangle and shade it with a different colour.

Label it: "DWL" (deadweight loss) or "Welfare loss"

This triangle shows the loss of beneficial trades — transactions that would happen at the old price but don't happen at the new, higher price.

Critical labeling rules

Diagram checklist