Suppose that, in the market for soda drinks, demand is given by P= 48 – 0.6Q, and supply is given by P= 0.2Q. Further, suppose that the government decides to impose a $4 per soda drink.

A. On a graph, demonstrate the effect of the tax on the equilibrium price and quantity. (Clearly label the value of each both before and after the tax.)

B. Show on the graph and calculate the tax revenue and deadweight loss that result from the tax.

C. Who bears the greater burden of the tax, producers, or consumers? Explain why this is the case.

(You can draw the graph, take a picture and attach it here. Please do *not* take a picture of your hand-written answer, it is much easier for your marker to read the typed text)

Answer rating: 100% (QA)

Given 1Demand function is P 4806Q 2 Supply function is P 02Q In the equilibrium quantity supplied sh... View the full answer