Font Paragraph The September 28, 2021 edition of the Wall Street Journal contained an article titled "Democrats Plan to Tax the Poor" (written by Tom Giovanetti; there is no need for you to review the article). The article stated that the plan would double the federal excise tax on cigarettes from $1 to $2 per pack. Some say this is a version of the so-called "sin tax" which involves using taxes to discourage certain behaviors. Others think it is aimed at more revenue generation. . Using a graph with quantity on the horizontal axis and price on the vertical axis, show the equilibrium P and Q (labeling it Po and Qo) prior to raising the excise tax by $1. You should assume Demand is downward sloping and Supply is upward sloping. . Now add the impact of the increase in cigarette excise taxes of $1.00. Clearly show with an arrow (keeping in mind that the direction of the shift for depicting both taxes and subsidies carries a special meaning in economics) and explain any shifts in demand and/or supply curves. Label any shifted curves as D, and/or S1. If the curves have not shifted, please explain why. Graphically depict the new equilibrium price and quantity (labeling it P, and Q1). At the new equilibrium, please determine how much of the excise tax increase was borne by cigarette consumers and how much was absorbed by cigarette firms. Indicate the incidence of taxation for both consumers and producers as shown on your graph and explain, defining the concept and comparing the two. If demand for cigarettes tends to be relatively price-inelastic (steep) and supply of cigarettes tends to be relatively price elastic (flatter), who will bear higher burden of taxation: consumers or producers or will they bear the burden equally? Why? You may want to illustrate your response with another graph, especially if the graph that you've previously drawn does not reflect these specific shapes of demand and supply curves. Please upload a single MS Word, Adobe PDF, or graphics file (JPEG, TIFF, PNG, BMP only) that does not exceed 5MBs with a graph and a narrative response where indicated as an answer to this question. (Ctrl) . Display Settings