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The government legalized the sale and use of recreational cannabis on the 17* of October 2018. The government introduced a per unit excise on sellers
The government legalized the sale and use of recreational cannabis on the 17* of October 2018. The government introduced a per unit excise on sellers of S1 per gram. The market is difficult to estimate, but estimates put sales at about 500 million grams and the after-tax market price that consumers pay is about S10 in 2023. There is a range of elasticity of measures. Recent estimates indicate that the elasticity of demand is approximately =-0.73, while elasticity of supply is approximately n = 1.42. 1. On the back of this paper, use a ruler to sketch the market demand and supply curves. Be sure to label the axis (P,Q), show the equilibrium quantity (QF), the gross of tax price (Pg) that consumers pay, the net of tax price (P,) that suppliers receive, the area that represents the tax revenue (R), and the area that represents the Dead Weight Loss (DWL) from the tax. o Consumers are paying about $10 per gram, which means that producers are receiving $9 per gram. What is the economic incidence of this tax on consumers. Show your work in the space provided. 3. If the tax were removed, what would be the market equilibrium price and quantity. Show your work. 4. The deadweight loss of the tax is DWL =$___ . Show your work
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