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There has been rumours that the government is developing a secret plan to tax mango producers. The tax t will be in $ per kilo
There has been rumours that the government is developing a secret plan to tax mango producers. The tax t will be in $ per kilo of mangoes. A whistle blower has stolen the diagram shown in Figure 1. The variable P is measured in $ per kilo of mangoes and the variable Q is measured in kilos of mangoes per hour.
You are required to answer the following questions in your role of detective economist for an important news corporation.
- What is the pre-tax equilibrium price of mangoes? [5 marks]
- What is the price paid by consumers (buyers) after the tax has been introduced? [5 marks]
- What is the price received by producers (sellers) after the tax has been introduced? [5 marks]
- What is the burden on consumers? [7.5 marks]
- What is the burden on producers? [7.5 marks}
- What is the value of the tax t expressed in $ per kilo of mangoes? [10 marks]
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