1. Demonstrate graphically and explain verbally the concept of consumer surplus. 2. Demonstrate graphically and explain verbally the concept of producer surplus. 3. Demonstrate graphically and explain verbally why the equilibrium values of price and quantity in a supply and demand model lead to the maximum combination of consumer and producer surplus. 6. Demonstrate graphically and explain verbally the cost to consumers of a tax of t per carton imposed on the sellers of cigarettes. Where does the lost producer surplus go? 9. Suppose the price elasticity of demand is 1.5 and the price elasticity of supply is 0.5, what is the percentage of a tax borne by the consumer, and what is the percentage of the same tax borne by the producer?

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1 Consumer Surplus Consumer surplus is a measure of the economic benefit or gain that consumers receive when they are able to purchase a product at a price lower than the maximum price they are willin... View the full answer