Suppose you are an aid to the Odododiodo Member of Parliament who is concerned about the impact of a new tax on the welfare on his constituents. You have explained to him that one of the ways he can determine the impact is to calculate the price elasticity as well as the consumer surplus. Conduct a formal analysis by undertaking the following exercises when the demand
Suppose you are an aid to the Odododiodo Member of Parliament who is concerned about the impact of a new tax on the welfare on his constituents. You have explained to him that one of the ways he can determine the impact is to calculate the price elasticity as well as the
a. Sketch the supply and the demand
b. Calculate the
c. If government imposes a tax of ¢2 on this commodity, calculate the new price and quantity after
the imposition of the tax
d. Calculate the consumer surplus before the tax
e. Calculate the own price elasticity of demand before the imposition of the tax.
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