suppose that a city government introduces a $0.50 excise (commodity) tax on consumers of bottles of soda to…

suppose that a city government introduces a $0.50 excise (commodity) tax on consumers of bottles of soda to improve the health of its citizens.\na. manipulate the accompanying graph to demonstrate the impact of the tax on the market for soda.\nb. what would the new equilibrium quantity be if, instead of taxing consumers, the city taxed producers?\nthousand bottles

suppose that a city government introduces a $0.50 excise (commodity) tax on consumers of bottles of soda to improve the health of its citizens.\na. manipulate the accompanying graph to demonstrate the impact of the tax on the market for soda.\nb. what would the new equilibrium quantity be if, instead of taxing consumers, the city taxed producers?\nthousand bottles

Answer

Explanation:

Step1: Understand tax - impact on market

When a tax is imposed on consumers, the demand curve shifts downwards by the amount of the tax ($0.50). When imposed on producers, the supply curve shifts upwards by the amount of the tax. But the economic incidence of the tax (the division of the tax burden between consumers and producers) and the new equilibrium quantity are the same regardless of who is taxed.

Step2: Analyze market equilibrium

The equilibrium in a market occurs at the intersection of the demand and supply curves. With a tax, the new equilibrium quantity is determined by the intersection of the shifted curves. Since the tax amount is fixed and the elasticities of demand and supply remain the same, the new equilibrium quantity will be the same whether producers or consumers are taxed. However, without the specific equations of the demand and supply curves or more information from the graph (such as exact intersection points before - tax), we assume based on the principle of tax incidence equivalence.

Answer:

The new equilibrium quantity would be the same as when consumers are taxed. Without further information from the graph (like exact coordinates of intersection points), we cannot give a numerical value for the quantity. But conceptually, it is invariant to whether producers or consumers are taxed.