Suppose the Punjab government requires Coke drinkers to pay a $2 tax on each case of Coke
purchased.
a. Draw a supply-and-demand diagram of the market for Coke without the
tax. Show the
and the quantity of Coke sold. What is the difference between the price
paid by consumers and the price received by producers?
b. Now draw a supply-and-demand diagram for the Coke market with the
tax. Show the price paid by consumers, the price received by producers,
and the quantity of Coke sold. What is the difference between the price
paid by consumers and the price received by producers? Has the quantity
of Coke sold increased or decreased?
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