Problem: Your boss asks you to analyze the potential impact of a proposed excise tax. In order to make your case, you plan to analyze the impact of this change in taxation on the level of consumer surplus. You hire an economist to estimate a supply and demand curve for the product upon which the proposed excise tax is going to be imposed. The demand and supply curve for this market are the following:

Required:

a. Use these equations to draw a graph of both demand and supply.

b. Calculate the price and quantity of equilibrium without the excise tax?

c. Calculate consumer surplus given the above demand and supply curve?

d. Now assume that the government imposes a $5 excise tax. If this tax is levied, calculate the new equilibrium price and quantity?

e. Calculate the new consumer surplus after the imposition of the new tax?