Answer Happy

Federal government is considering a temporary cut to the fuel
excise tax to reduce the price of petrol in Australia. See for
example: “Budget 2022: Temporary cut to fuel excise to slash petrol
prices” published at news.coma.au on March 21, 2022. (PDF version
can be found on Moodle). For the purposes of this question assume
that the petrol market is competitive and that the excise tax is
paid by the suppliers. (a) Use the model developed in Q3 to predict
how the proposed policy (reduction in the fuel excise tax) will
affect the equilibrium in the domestic market for petrol.
Illustrate your answer on a graph, including all relevant supply
and/or demand shifts and the corresponding changes in the
equilibrium price and quantity. (b) Evaluate this policy from the
point of view of social welfare. What the benefits of this policy?
What are the costs of this policy that will be born by all members
of the society? Do you think this is a good policy overall? Explain
you answer