How much in taxes will the local government collect

Reference no: EM131181814

Suppose that your town decides to impose a tax on 2-liter bottles of soda to encourage healthier dietary habits. Before the tax, the supply and demand schedules for bottles of soda are given in the table below.

a. Draw a supply-and-demand graph illustrating the market before the tax. What is the equilibrium price and quantity for bottles of soda?

b. The town then imposes a tax of $0.20 per bottle. Illustrate this on your graph. What is the new equilibrium price and quantity for bottles of soda?

c. How much in taxes will the local government collect?

Reference no: EM131181814

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