Question: 1. Draw a demand/supply graph with the following characteristics:
- The price elasticity of demand is -0.5
- The price elasticity of supply is 2
- Label the equilibrium price, P1 and the equilibrium quantity, Q1.
2. Show the impact of an excise tax imposed on this product:
- Use the label Pb to indicate the price paid by the buyer after the tax
- Use the label Ps to indicate the price received by the seller after the tax
- Use the label A to indicate the consumer surplus after the tax
- Use the label B to indicate the producer surplus after the tax
- Use the label C to indicate the tax revenue received by the government
- Use the label D to indicate the deadweight loss as a result of the tax