Suppose that the market for cigarettes is a competitive market and is described by the following supply and demand functions:

Demand: Q^D = 100000 - 500P

Supply:Q^S =- 20000 + 2000P

Where Q is the number of packets and P is the price per packet of cigarettes.

(a) (6 marks) Calculate the equilibrium price and quantity and draw a diagram to illustrate your answer.

(b) (8 marks) Show on your diagram and calculate the size of the:

(i) Consumer surplus

(ii) Producer surplus

(iii) Total surplus

(iv) Deadweight loss

(c) (6 marks) Suppose the government wants to reduce the consumption of cigarettes to 50000 packets. What size specific (per unit) tax will the government impose on cigarette producers to achieve this outcome?

(d) (3 marks) What is the per unit incidence or burden of the tax experienced by consumers?

(e) (3 marks) What is the per unit incidence or burden of the tax experienced by producers?