Question 5

Suppose that the government imposes a tax on cigarettes. Use the diagram below to answer the questions. D is the demand curve before tax, S is the supply curve before tax and ST is the supply curve after the tax. Price. 10 12 Q {a} For the market for cigarettes without the tax. Indicate: {i} Price paid by consumers (ii) Price paid by producers {iii} Quantity of cigarettes sold {iv} Buyer's reservation price (v) Sellers reservation price