Question 3: 10 marks Let us consider two types of goods in an economy: demerit goods and all other goods. The government is concerned with the excessive consumption of demerit goods in an economy and therefore decides to levy a commodity tax such that the tax burden is fully borne by the consumers. Explain with the help a well-labelled diagram the distortions created by such commodity tax on demerit goods assuming the same effect on individual welfare. What determines the size of the distortions in this case?