How £100 vanishes in minutes: inside the ‘slot farms’ targeted in the budget
Real-world example for IB, A-Level, AP and IGCSE Economics essays: Taxes, subsidies and price controls, Externalities and the environment, Market power and competition policy
What happened
The UK budget imposes a 25% tax on adult gaming centres, and undercover reporting shows such venues drawing customers in with music and atmosphere, with one person losing £100 in about five minutes.
The economics
This illustrates government intervention through a tax on a demerit good: taxing gambling raises its effective price, discourages consumption and internalises the external costs of problem gambling. Students can show a tax shifting the supply curve up and reducing equilibrium quantity.
Figures to quote
- 25% tax
- £100
- five £20 notes
Evaluation
However, demand may be inelastic — addicted consumers respond little to price, so the tax may not cut consumption much and could fall heavily on problem gamblers; if customers switch to less regulated online gambling, the tax's effect is weakened.
Practice question
Using the concept of externalities, evaluate the economic effects of a 25% tax on adult gaming centres.
Read the article ↗ · Draw the diagram in the Diagram Lab
Where it fits in the syllabus
- Taxes, subsidies and price controls: Indirect taxes, subsidies and maximum or minimum prices that governments use to change market outcomes.
- Externalities and the environment: Costs or benefits that fall on third parties without being priced, such as pollution and carbon emissions.
- Market power and competition policy: When a few firms control a market they can raise prices; governments use antitrust and regulation to protect competition.
- IB Economics: Government Intervention and Market Failure
- A-Level Economics: Government Microeconomic Intervention, Market Failure
- AP Microeconomics: Supply, Demand and Market Equilibrium, Market Failure and the Role of Government, Monopoly, Oligopoly and Monopolistic Competition
- IGCSE Economics: Government Intervention, Business Economics