Final answer:
To find the new equilibrium after a $3 per cigar tax, adjust the supply and demand equations to reflect that sellers will receive $3 less than what consumers pay (PD - PS = tax). The exact new prices for consumers (Pc) and sellers (Pp) depend on the original supply and demand equations. The tax revenue can be visualized as a leftward shift in the supply curve or the shaded area on a graph representing tax per unit times quantity sold (Qt).
Step-by-step explanation:
To solve for the new equilibrium with a $3 per cigar tax imposed on sellers, we must adjust the supply and demand equations to account for the tax. With the equation (PD – tax) = PS, where PD is the price paid by consumers and PS is the price received by sellers, we can say that for every unit sold, sellers will receive $3 less than what consumers pay.
The new price paid by consumers (Pc) will be higher than the initial equilibrium price, as they will bear part of the tax burden. Conversely, the new price received by sellers (Pp) will be lower because they have to pay the tax. To find these prices and the quantity bought and sold (Qt), we would need to plug the value of the tax into the original supply and demand equations and solve for the new equilibrium.
For instance, if the original equilibrium price was Pe, sellers will now receive Pe - $3 after the tax is imposed, and consumers will pay Pc which will be Pe + the portion of the tax they bear. The exact figures depend on the specific supply and demand equations given for the market in question. Without the actual equations, we can't provide numerical answers, but this approach will allow you to solve for Pc, Pp, and Qt.
Remember, the tax revenue is given by the shaded area in a supply and demand graph, which we can find by multiplying the tax per unit by the quantity sold (Qt). Additionally, since the tax can be viewed as raising the costs of production, another way to visualize this is a leftward shift of the supply curve where it intercepts the demand at Qt.