ThedemandforsmartphonesisgivenbyD(p)=400p+(p^T/5),wherepisthepriceofasmartphoneandp^Tisthe price of a tablet (a substitute for smartphones). The supply is given byS(p) = 4p. The price of tablets isfixedandsetatp^T=500.

Suppose that the government imposes two taxes on phones: a $30 tax to be paid by the consumers and $70 taxthatproducershavetopay.

1. Whatistheeconomic incidenceofthispolicy?
2. Whatistheexcessburdenhere?
3. Howwouldeconomicincidencechangeifgovernmentimposedinstead a$70taxonconsumer sanda$30taxonproducers
4. Imaginethatthetaxonproducersincreases to$120,whilethetaxonconsumers remainsunchangedat $30.Howdoestheexcessburdenchange? Dividethechangeinexcessburdenintocomponentscoming fromthesurplusofeachofthepartiesinvolved.
5. Whichcomponentofthechangeinexcessburden isthelargest?Explainwhy.

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