3.(Excise Taxes) The demand and supply for soft drinks are given by Q = 20 - P and Q = 3P, respectively.

1. Solve for the equilibrium price and quantity.
2. Suppose now the government imposes a per-unit tax of $4 on the sellers. Solve for the new quantity, net price sellers received, and price consumers paid.
3. Calculate the government revenue from taxation.

PQDQS

1193

2186

3 179

41612

51515

4.The demand for illegal drugs is inelastic. Most of theincome coming from illegal drugs goes into criminal activities. Assumingthat these statements are true:

(i) How the equilibriumprice and quantity of illegal drugs will be affected after a successful marketing campaign that would decrease the supply of illegal drugs? And what about the total expenditure/revenue in illegal drugs?

(ii) And what about the level of criminal activities?

(iii) Could you think of more effective ways to fight illegal drugs so as to lower the amount of crime?