Consider the following two policies.

Policy A: Tax is levied on sellers for the sales of milk.

Policy B: Tax is levied on buyers for the sales of jewelry.

The government wants sellers to bear more of the tax burden than buyers do. Which one of the above policies should the government implement? Explain.

2. Consider the sales tax on luxury handbags. Assume that the demand for luxury handbags is very elastic, but not perfectly. A sales tax is levied on sellers. Draw the graph to show the effects of the sales tax. Indicate CS, PS, tax revenue and DWL.