Problem
Government officials are debating whether to impose a 50-cent per pound tax on coffee or carrots. They are wondering which would be more effective at raising revenue. Draw a supply curve that represents the quantity supplied per pound for coffee. Let this supply curve also represent the supply for carrots. Draw in a new supply curve representing supply for both with the tax. Draw in a relatively inelastic demand curve for coffee, D, and indicate the pretax price and quantity as P and Q. Draw in a relatively elastic demand curve, D1, for carrots so that the pretax price and quantity are identical. Illustrate the effects of the tax on the price and quantity of carrots, labeling the new values as P1 and Q1. Illustrate the effects of the tax on the price and quantity of coffee, labeling the new values as P2 and Q2.
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.