Question

USING GRAPH PAPER (SCALE 1 Horizontal Square = 5,000 units & 1 vertical square = $2)
graph the original demand and two supply functions and then mark in Figure 1. Note YOU ILLUSTRATED TWO of the THREE CURVES in ASSIGNMENT B‐ NOW
ADD the supply curve WITH the tax. The vertical distance in supply functions is $1 at any
quantity.

Answer 1

The demand curve is downward-sloping, the supply curve is upward-sloping, they intersect in equilibrium point.

If tax is imposed, then the supply curve will shift to the left, so the equilibrium price will increase, the equilibrium quantity will decrease.