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Can you answer the question fully and show a full explanation? Qu estio n 2 Agovernment decides to reduce air pollution by reducing the use
Can you answer the question fully and show a full explanation?
Qu estio n 2 Agovernment decides to reduce air pollution by reducing the use of petrol and imposes a specic tax of 0.50 on energy companies for each Hugof petrol sold. a} Use a supply and demand diagram and show the effect ofthe tax on consumer and producer surplus and comment on the incidence of the tax on consumers ofenergy and producers of energy. b] Should it impose this tax on petrol companies or motorists? Explain, using a supply and demand diagram. c} If the demand for petrol were more price elastic, would this tax be more effective or less effective in reducing the quantity of petrol consumed? Explain with both words and a diagram. :1] Are consumers of petrol helped or hurt by this tax? Whyi'lStep by Step Solution
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