1 a)The figure shows the demand and supply curves in the salt market. The government now decides to impose a sales tax of 30% on the price of

salt, to be paid by the suppliers. Which of the following statements is correct?

1. b)How does the new after tax equilibrium price paid by consumers change after the tax? How does the price change depend on elasticity?
2. c)Show graphically how tax impacts consumer and producer surplus.
3. d)What are the two main reasons the government taxes goods? What are the advantages of taxing an inelastic good? How about an elastic good?
4. e)Based on information from class, do you expect tax revenue to be large or small for salt tax?