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Consider the market for cola. Relationships for supply and demand are given by: P = 125 2Qd and P= 5 2Qs a) Plot the demand
Consider the market for cola. Relationships for supply and demand are given by: P = 125 2Qd and P= 5 2Qs" a) Plot the demand and supply curves with quantity on x-axis and price on y-axis. b) Find the equilibrium price and quantity. Label the graph from part a). Suppose an excise tax in the amount of $10 per case is imposed on cola suppliers. c) What is the new supply equation for cola? d) Find the new equilibrium price and quantity. How much tax revenue is collected? Illustrate these values on a graph. e) Is it true that producers can push the entire burden of the tax (known as the "tax incidence") onto consumers? Why or why not
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