1. The government decides to reduce air pollution by reducing the use of petrol. It imposes

1. The government decides to reduce air pollution by reducing the use ot petrol. It imposes 0.50 tax for each liter of petrol sold. a) Should it impose this tax on petrol companies or motorists? ELain carefully using a supply and demand diagram. the tax is imposed on producers, the supply curve shifts up by the amount ot the tax (0.5) to S2 Then the equilibrium quantity is Q2, the price pajd by consumers is P2 and the price received by producers is P2 - 03 the tax is imposed on consumers, the demand curve shifts to the lett by the amount ot the tax to D. Tine downward shift in the demand curve is the same as the upward shitt in the supply curve (when the tax is imposed on producers). The equilibrium quantity is Q2, the price paid by consumers is P2 and the once received by producers is P2 -0.5. Because the results are the same, we can say that it doesnt matter wqnether the tax is imposed