1. Consider the market for a good that has demand perfectly price inelastic and a regular, elastic supply.
a. Draw the demand and supply curve for this market that shows an equilibrium quantity (Q1) as 1000 units and an equilibrium price (P1) as $5. You must label every single item on the graph very clearly as we do in class.
Now suppose that a tax of $3 per unit is imposed by the government on this market.
b. Show on the same graph shifting the supply curve to the left to respond to the tax. You must label the new supply curve, price buyers pay, price sellers receive on the same graph.
c. How much would be the government revenue after tax? Just the numeric answer please.
d. How much would be the burden of the tax that sellers have to bear? Just the numeric answer please.