Suppose that in order to reduce cigarettes, the state is bearing in mind $1 tax on each packet of

cigarette sold (note the tax is levied on producers). The demand curve is Qd = 300000 - 20000p,

and the supply curve is Qs = 15000p.

Required.

1. Calculate the price and quantity of cigarettes before tax.

2. Calculate the price paid by consumers and price received by producers after tax.

3. Calculate the quantity of cigarettes sold after tax

4. Calculate the revenue the tax raise for the government.

5. Calculate the tax revenue that comes from the consumers

6. Calculate the tax revenue that comes from the producers

7. If the demand for cigarettes is elastic for younger ones than for older ones. Will the

cigarette tax be more, less or equally effective at reducing cigarette consumption among

young smokers? Explain.

Provide full explanations and workings