Assume that the demand curve for a good is given by p=8-q and the supply curve is given by p=q. The government considers imposing a tax on the consumers equal to t for each unit. Derive and show in a figure the produced quantity with and without the tax and the government’s tax incomes. How are the tax incomes affected by an increase in the tax rate? Explain.

Answer rating: 100% (QA)

When the government imposes a tax of t on consumers it shifts the demand curve downwards by t units This means the new demand curve will be given by p ... View the full answer