Questions on taxation
The following figures relate to the demand and supply of cigarettes:
|Price £||Q demanded (m)||Q supplied (m)|
Plot the demand and supply curves and show equilibrium price and quantity.
The government decides to impose a tax on cigarettes of £2.00 per pack. Plot a new supply curve, and show the effect of this tax on:
The price of cigarettes and, the amount of cigarettes consumed.
From your graph estimate the incidence (burden) of tax on the consumer and producer.