18. Answer all parts (a)-(c) of this question (a) [7 marks] Explain the concepts of consumers' surplus and producers' surplus. Why in a competitive market social welfare is the highest at the equilibrium? Use a diagram to illustrate your answer. (b) [9 marks] Explain the main effects of the introduction of a specific tax on the competitive market equilibrium. How these effects depend on the elasticity of demand and supply? Use a diagram to your answer. (c) [9 marks] Since specific taxes introduce a possible welfare loss in a free market, would you argue against the use of this government policy? Explain.
