Question
https://www.theguardian.com/world/2020/may/05/india-imposes-70-alcohol-tax-as-covid-19-lockdown-relaxed a)Explain the government's intended effect of the coronavirus alcohol tax. (2 marks) b)Assume there was no tax on alcohol in Delhi before, use a
https://www.theguardian.com/world/2020/may/05/india-imposes-70-alcohol-tax-as-covid-19-lockdown-relaxed
a)Explain the government's intended effect of the coronavirus alcohol tax. (2 marks)
b)Assume there was no tax on alcohol in Delhi before, use a clearly-labelled diagram to show what happens when the government imposes 70% coronavirus tax. After the tax change, what happens to price and quantity? Is the new price old price plus tax? (You can assume the curves are linear all the way to the axes) (4 marks)
c)What happens to consumer surplus, producer surplus and deadweight loss after the tax change? Show after-tax consumer surplus, producer surplus and deadweight loss on your diagram. (1 marks)
d)Show the tax burden for consumers and for producers and on your diagram. Who would bear more of the tax burden and why? (3 marks).
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