PLEASE SHARE DIAGRAM AND DETAILED EXPLAINATION
1. Using a diagram showing consumer and producer surplus, show generally how consumption taxes impact consumer and producer welfare. Remember to highlight the deadweight loss (DWL) to your audience.
2. Using a demand and supply diagram, explain what a tax on imports (tariffs) would look like. Explain the difference between the DWL in question 1 and question 2.
3. Now extend this to the macroeconomy by showing how consumption taxes generally impact aggregate demand and aggregate supply (AD-AS).
4. Using an AD-AS model, can you answer whether a tax that improves people’s health could have any potential long-term benefits for the economy.
5. Finally, using Directed Acyclic Graphs (DAGs) briefly discuss how you could use an empirical econometric model to assess the health and economic growth consequences of a ‘fat tax’.
