Diagram 1: (A diagram showing a standard downward-sloping demand curve and an upward-sloping supply curve intersecting at equilibrium price P1 and quantity Q1. Label axes clearly: Price (P) on the vertical axis and Quantity (Q) on the horizontal axis.)

Diagram 2: (A diagram showing the same demand and supply curves as Diagram 1. A vertical line represents the tax. The supply curve shifts upwards by the amount of the tax. The new equilibrium point (P2, Q2) is below the original equilibrium point. Label axes clearly.)

Explanation:

• Impact on Price and Quantity: The tax increases the cost of production for sellers, causing the supply curve to shift upwards. This leads to a higher equilibrium price (P2) and a lower equilibrium quantity (Q2).
• Consumer Welfare: The tax reduces consumer welfare. Consumers now have to pay a higher price for the product, and they purchase a smaller quantity. This is represented by a reduction in the consumer surplus (the area above the market price and below the demand curve).
• Government Revenue: The government collects revenue from the tax. This revenue is represented by the rectangle formed by the tax amount, the change in quantity, and the new equilibrium price. The government revenue is equal to the tax per unit multiplied by the new quantity sold.

A mixed economy is an economic system that combines elements of both market and command economies. This means that while private individuals and businesses own the means of production and make decisions based on supply and demand (characteristic of a market economy), the government also plays a significant role in regulating the economy, providing public goods and services, and redistributing income (characteristic of a command economy).

Advantages of a mixed economy:

• Provision of Public Goods: The government can provide essential public goods and services that the market may under-provide, such as national defence, law and order, and infrastructure (roads, railways). These are often non-excludable and non-rivalrous.
• Reduced Inequality: Government intervention through taxation and welfare programs can help to reduce income inequality and provide a safety net for the vulnerable. This can lead to greater social stability.

Disadvantages of a mixed economy:

• Higher Taxes: To fund public goods and welfare programs, a mixed economy typically requires higher levels of taxation, which can disincentivize work and investment.
• Government Inefficiency: Government bureaucracy can be slow and inefficient, leading to delays in decision-making and potential misallocation of resources.

Potential Benefits:

• Environmental Benefits: Subsidies encourage the development and adoption of renewable energy sources like solar and wind power. This reduces reliance on fossil fuels, leading to lower carbon emissions and mitigating climate change.
• Economic Growth & Job Creation: The renewable energy sector is a growing industry. Subsidies can stimulate investment and innovation in this sector, leading to job creation in manufacturing, installation, and maintenance.

Potential Drawbacks:

• Cost to Taxpayers: Subsidies for renewable energy require significant government funding, which ultimately comes from taxpayers. This can lead to higher taxes or cuts in other public services.
• Distortion of Market Efficiency: Subsidies can distort the market by artificially lowering the price of renewable energy. This may hinder the development of more cost-effective renewable energy technologies and could lead to inefficient allocation of resources. It may also protect less efficient renewable energy companies from competition.