Now suppose Table $1$ provides us equilibrium price and quantity, then draw a demand and

supply diagrams for the market of company A$$s physical store as well as its online store. Name

and fully label your diagram including both axes and indicate and explain points of interest

using P for price $($P$1,$ P$2$ etc$)$ and Q for quantity $($Q$1,$ Q$2$ etc$).$ Hints: For simplicity assume that

supply curve is upwardly sloped, and the diagrams are consistent with Table $1.$

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To draw demand and supply diagrams for the physical store and online store of company A$,$ let's use Table $1$ data as equilibrium points and assume that the supply curve is upward sloping. The demand curve represents the quantity demanded by consumers at different price levels, and the supply curve represents the quantity supplied by the company. Here's how you can draw the diagrams:

Physical Store:

Demand Curve $($D$)$:

Negative slope $($downward$),$ indicating the law of demand.

Use the initial quantity demanded at the physical store $(16$ units$)$ at the initial price $($$$20)$ to plot a point $($P$1,$ Q$1)$ on the demand curve.

Supply Curve $($S$)$:

Upward slope, indicating the law of supply.

Use the initial quantity supplied at the physical store $(16$ units$)$ at the initial price $($$$20)$ to plot a point $($P$1,$ Q$1)$ on the supply curve.

Equilibrium $($E$1)$:

The intersection of the demand and supply curves represents the initial equilibrium point.

Label this point as E$1.$

Online Store:

Demand Curve $($D$)$:

Since there is no sales tax for online sales, the demand curve is based on the online quantity sold at the initial price $($$$20)-20$ units.

Plot a point $($P$1,$ Q$1)$ on the demand curve.

Supply Curve $($S$)$:

Assume that the supply curve for online sales is perfectly elastic, as the company can provide any quantity at the fixed online price.

Plot a horizontal supply line at the initial online quantity $(20$ units$).$

Equilibrium $($E$1)$:

The intersection of the demand and supply curves represents the initial equilibrium point.

Label this point as E$1.$

Now, consider the effects of the sales tax:

The demand curve for the physical store will shift leftward, leading to a new equilibrium point $($E$2)$ with a higher price $($P$2)$ and a lower quantity $($Q$2)$ at the physical store.

The demand curve for the online store will remain unchanged, as there is no sales tax for online sales.

Label and fully explain each point on the diagrams, emphasizing the changes due to the imposition of the sales tax.

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Now work further on your diagram in part $($v$)$ to show the impact of a sales tax on quantity sold

at the physical store. Illustrate and explain how the sales tax affects the consumers of the

physical store. Also indicate the area on the diagram that represents tax revenue. How much

burden of tax is born by an individual consumer as well as an individual seller?