1. The government decides to impose an indirect tax on tomato of Rs15 per kg.

(a) Using a diagram, analyse the effects on market outcomes. 5 marks

(b) Discuss the consequences of the tax for stakeholders. 5 marks

2. The market demand and supply functions of a commodity are given by: Qd=40-1/4P and Qs=10+1/2P.

where Qd = quantity demanded, Qs = quantity supplied and P = price

(a) Calculate the equilibrium price and quantity. 5 marks

(b) If the government imposes a tax of 5 per unit, what is the new equilibrium price and quantity? 5 marks

(c) Who pays the tax? 5 marks