Problem
The demand for bags of candy is given by P = 48-0.2Q, and the supply by P = Q.
(a) Illustrate the resulting market equilibrium in a diagram.
(b) If the government now puts a $12 tax on all such candy bags, illustrate on a diagram how the supply curve will change.
(c) Compute the new market equilibrium.
(d) Instead of the specific tax imposed in part (b), a percentage tax (ad valorem) equal to 30 percent is imposed. Illustrate how the supply curve would change.
(e) Compute the new equilibrium.
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.