The mayor of New York has decided to impose a $3 per cigar tax on sellers in this market. 1.1 With the tax in place, what is the price paid by consumers? What is the price received by sellers? How many cigars will be bought and sold? Illustrate this outcome on the graph. 1.2 Who pays more of the tax, consumers or sellers? What does this tell you about the relative elasticities of the demand and supply curves? 1.3 What is the deadweight loss associated with the imposition of this tax? Show your calculations. Label the deadweight loss on the graph. 1.4 If the demand curve were less elastic, how would this affect your answer in part 1.2? 1.5 If the demand curve were less elastic, how would this affect your answer in part 1.3?

Microeconomics Assignment 4 1. S 15 14 S 13 12 11 10 00 60 W D N O 0 5 10 15 20 25 30 35 40 45 50 55 60 70 75 80 Cigars