The term Chelsea tractor refers to the large 4x4's which are used around the cities and towns, these vehicles are now more popular than ever. As stated by the BBC
"Last year some 187,000 were sold ? compared with 80,000 a decade before ? accounting for almost 8%, or one in every fifteen, of all cars sold." This shows a growing trend in the popularity of these types of vehicles, many people use them for the school run due to the safety aspect of the cars, many just like to show off their wealth and have the "big car".
The problem occurs when many people drive these vehicles around town and in the inner cities, as they cause congestion and produce more carbon dioxide than other cars. Many people believe that in these circumstances the "Chelsea tractor" should be taxed more than other vehicles due to their size and emissions factor. Many people agree but some do not see why they should pay more, the minority of so called "Chelsea tractors" are used in the country by people who use them for the purpose of their design and these people feel they would be being penalised for owning a working vehicle.
Many environmentalists believe that taxing these ?Chelsea tractors' higher will stop people from buying them, but the question comes where to tax these vehicles more, the suppliers or consumers. If suppliers are taxed this will increase the price of the cars at the same time driving some consumers away, inversely the substitutes ?smaller cars' would become more desirable. As Fig. 1 shows if a higher tax was put directly on the production of 4x4's the cost of production would increase, thus the supply line would shift to the right making a market equilibrium shift from what it previously was. The problem with this is that if the car manufacturers are taxed highe ...