: In the wake of Russia's invasion of Ukraine, global oil prices soared to more than $120 a barrel amid concerns about a shortfall in global supplies from Russia. But they have fallen sharply since then as the global economy slows down and countries use less oil.

Required: Let us assume that the government imposes a tax on the producers of oil.

a. Analyse the welfare impact of taxes on the consumer and producer of oil. What will determine the overall tax burden? (5 marks)

b. Analyse the social and budget point of view of imposing a tax on oil. Is the tax efficient? (3 marks)