a) In the market for sugary drinks, the current equilibrium price is $10 and the equilibrium quantity is 30. The demand choke price is $50 and the supply choke price is $5 (a) Draw a demand and supply diagram, and shade the regions that represent consumer and producer welfare. Calculate the Total welfare in this market b) In this market, you now know that E D = −0.4 and E S = 1.2. Redraw your diagram in part (a) with the correct sloping curves. In this part you do not have to shade the welfare regions. All you need to do is redraw the diagram with the same equilibrium price and quantity, and choke prices but adjust the slope of each curve to reflect their respective elasticity c) If a tax was to be implemented in this market, what percentage of the burden is borne by the buyer?
a) In the market for sugary drinks, the current
b) In this market, you now know that E D = −0.4 and E S = 1.2. Redraw your diagram in part (a) with the correct sloping curves. In this part you do not have to shade the welfare regions. All you need to do is redraw the diagram with the same equilibrium price and quantity, and choke prices but adjust the slope of each curve to reflect their respective elasticity
c) If a tax was to be implemented in this market, what percentage of the burden is borne by the buyer?
d) The government plans to discourage the consumption of sugary drinks and as such, they implemented a $1 tax on every bottle produced. In this situation, the suppliers are taxed directly but they hope to pass on all the tax burden to the consumer. i. Redraw your diagram from part (c) to reflect the impact of the tax on supply ii. Calculate and show on your graph the new price paid by buyers and received by suppliers iii. On your graph, shade the region represented by the dead weight loss.
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