Question
1.Suppose the government imposes a tax of $1.00 on each water bottle. Complete the column showing quantity supplied after the tax. Price QD (100s) Qs(100s)
1.Suppose the government imposes a tax of $1.00 on each water bottle. Complete the column showing quantity supplied after the tax.
Price | QD (100s) | Qs(100s) | Quantity supplied after tax (t) (100s) |
$9 | 20 | 44 | |
8.5 | 24 | 40 | |
8 | 28 | 36 | |
7.5 | 32 | 32 | |
7 | 36 | 28 | |
6.5 | 40 | 24 | |
6 | 44 | 20 |
2.On your graph, plot the new supply curve after the imposition of the tax (in a different colour, to differentiate the supply curve).
3. What will be the new equilibrium price and quantity?
4. How much of the tax is passed onto the consumers in the form of price increase, and how much is paid by the producers? Indicate the producer and consumer burden on your graph.
5. Calculate the deadweight loss and indicate its position on the graph
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