Suppose that the market for cigarettes in a particular town has the following supply and demand curves: QSP; QD = 60 - P. 3. Suppose the flat tax is 20. What is the new equilibrium quantity, the price paid by consumer, and the price received by the supplier? 4. Use the results from Q6.3, compute the consumer surplus before and after tax. Draw the supply and demand curve and label the equilibrium quantity and prices. Also shade the area of the consumer surplus before and after tax. 5. If the council wants to reduce cigarette sales to 5, what would the appropriate tax be?

Suppose that the market for cigarettes in a particular town has the following supply and demand curves: QSP; QD = 60 - P. 3. Suppose the flat tax is 20. What is the new equilibrium quantity, the price paid by consumer, and the price received by the supplier? 4. Use the results from Q6.3, compute the consumer surplus before and after tax. Draw the supply and demand curve and label the equilibrium quantity and prices. Also shade the area of the consumer surplus before and after tax. 5. If the council wants to reduce cigarette sales to 5, what would the appropriate tax be?

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter20: Elasticity: Demand And Supply

Section: Chapter Questions

Problem 10E

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