# 4 (a) Use diagrams to explain how the burden of a sales tax (levied on the...

###### Question:

4 (a) Use diagrams to explain how the burden of a sales tax (levied on the seller) falls on the buyer and the seller of a good. Under what conditions will the consumer pay most of the tax? (b) Suppose that the market for ice-cream can be described by the following equations: Demand: P 10-Q Supply: P-Q-4 where P is the price in euro per unit and Q is the quantity in thousands of units. Find the equilibrium price and quantity. Suppose the government imposes a tax of1 on the sellers of ice-cream. What will the new equilibrium quantity be? What price will the consumer pay? What price will the seller receive and what is the tax revenue?

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