Suppose the equilibrium price of potatoes in an indistorted market would be $5 per kilo. The government however, has imposed a price ceiling of $2 per kilo creating a shortage in the market and a deadweight loss (DWL).

(a) Using a supply and demand diagram explain what the eect on the quantity of potatoes traded will be as well as the welfare effects arising from the government imposing a specific tax of $1 per kilo on the production of potatoes (that is, a tax levied on the suppliers of potatoes) while continuing to maintain the price ceiling.

(b) Using a supply and demand diagram explain what the eect on the quantity of potatoes traded will be as well as the welfare effects arising from the government imposing a specific tax of $1 per kilo on the consumption of potatoes (that is, a tax levied on the consumers of potatoes) while continuing to maintain the price ceiling