Elasticity, Indirect taxation and Subsidies

Please construct the following activity in a Word Document and submit to the Dropbox.

Objective:

Demonstrate understanding of specific taxes, their relation to elasticity of demand, and their impact on consumption of a product.

Task 1

The Ukrainian government has just imposed an excise tax on all tobacco products. Needless to say the voices of reaction have been both loud and mixed. Using your increasing powers of economic reasoning, answer the following questions regarding the Ukrainian situation.

Draw a graph that demonstrates the change in the market caused by the excise tax. Your graph should reflect the following: the relative price elasticity of the product the change in the market for tobacco products the amount of the excise tax and its impact on quantity and price the tax incidence for consumers and producers the revenue collected by the government from the tax the impact on social welfare (deadweight loss) due to the tax.
Answer the following questions regarding the impact of the excise tax. What groups would support the imposition of the excise tax on tobacco products? Explain your response.
What groups would oppose the imposition of the excise tax on tobacco products? Explain your response.
What group would most likely bear the brunt of the excise tax? Why?
What reason(s) might the government have for imposing the tax on tobacco.