Suppose the demand for a product is given by Q_D=16-2P, where Q_D is quantity per year measured in kilogram and P is price in AUD per kilogram. The supply curve for this product is given by Q_S=4P-2.

1)Determine the consumer surplus and producer surplus at the equilibrium price? [10 marks]

2)What would the market price be if the government impose $2 tax on each kilogram sold? What would be the price that consumers pay and the producers receive after tax? [15 marks]

3)Determine the tax incidence on the consumers and the tax incidence on the sellers. [10 marks]