Question 5:

In 2020 the UK government plans to introduce asales taxon all products bought online from overseas. Please note this is not a tariff - it is a tax. The tax will be 2% of the value of the products sold in the UK. This tax is collected from online sellers such as Amazon or ebay. Source: BBC (2019). See link:https://www.bbc.com/news/business-50656106

Consider the market for online products. The initial market equilibrium is at 10 million products sold per year at an average price of $500 each. Then, the UK government imposes a tax on the market, collected from sellers (for example Amazon and ebay). The tax is 2% per item (each item has an average price of $500).

Show the effect of this on the market for online products. Show the effect on consumers of online products, on the online sellers and on the government. Does the UK economy gain or lose as a result of the tax? Explain why. Use a diagram to support your answer. (5 marks)

Please draw a diagram for me