Suppose a local government votes to impose an excise tax of $0.90 per bottle on the sales of bottled water. (Assume that all bottles are identical and residents cannot shop elsewhere.) Before the tax the equilibrium price and quantity are $1.20 and 2000 bottles per day. After the tax is imposed, market equilibrium adjusts to a price of $1.70 and quantity of 1300 bottles per day. a. Draw the supply and demand diagram before and after the excise tax is imposed. 1.) Using the line drawing tool, plot the original and new supply curves and label the lines properly. 2.) Using the point drawing tool, indicate the original and new equilibrium points and label these points properly. Carefully follow the instructions above, and only draw the required objects. Price ($ per bottle) 3.00 2.80- 2.60- 2.40- 2.20- 2.00- 1.80 1.60- 1.40 1.20- 1.00- 0.80 0.60- 0.40 0.20- 0.00- 0 1000 2000 Quantity (bottles per day) 10 3000

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
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Suppose a local government votes to
impose an excise tax of $0.90 per bottle on
the sales of bottled water. (Assume that all
bottles are identical and residents cannot
shop elsewhere.) Before the tax the
equilibrium price and quantity are $1.20
and 2000 bottles per day. After the tax
is imposed, market equilibrium adjusts to a
price of $1.70 and quantity of 1300 bottles
per day.
a. Draw the supply and demand diagram
before and after the excise tax is imposed.
1.) Using the line drawing tool, plot the
original and new supply curves and label
the lines properly.
2.) Using the point drawing tool, indicate
the original and new equilibrium points and
label these points properly.
Carefully follow the instructions above, and
only draw the required objects.
Price ($ per bottle)
3.00
2.80-
2.60-
2.40-
2.20-
2.00-
1.80-
1.60-
1.40-
1.20-
1.00-
0.80-
0.60-
0.40-
0.20-
0.00+
0
1000
2000
Quantity (bottles per day)
10
3000
Transcribed Image Text:Suppose a local government votes to impose an excise tax of $0.90 per bottle on the sales of bottled water. (Assume that all bottles are identical and residents cannot shop elsewhere.) Before the tax the equilibrium price and quantity are $1.20 and 2000 bottles per day. After the tax is imposed, market equilibrium adjusts to a price of $1.70 and quantity of 1300 bottles per day. a. Draw the supply and demand diagram before and after the excise tax is imposed. 1.) Using the line drawing tool, plot the original and new supply curves and label the lines properly. 2.) Using the point drawing tool, indicate the original and new equilibrium points and label these points properly. Carefully follow the instructions above, and only draw the required objects. Price ($ per bottle) 3.00 2.80- 2.60- 2.40- 2.20- 2.00- 1.80- 1.60- 1.40- 1.20- 1.00- 0.80- 0.60- 0.40- 0.20- 0.00+ 0 1000 2000 Quantity (bottles per day) 10 3000
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