1. Type of Demand: The demand curve shows a relatively inelastic demand. This is because the quantity demanded changes by a smaller percentage than the price change. The steepness of the curve indicates the degree of price sensitivity.

2. New Market Price and Quantity: The tax of £0.50 per cup will shift the supply curve upwards. To find the new equilibrium, we need to consider the original demand curve and the new supply curve.

From the diagram, the original equilibrium is approximately £2.00 and 100 cups. The tax increases the cost for firms, leading to a decrease in quantity supplied. The new equilibrium will be at a higher price and lower quantity.

To calculate the new equilibrium, we need to find the point where the new supply curve intersects the demand curve. This is difficult without precise numerical values, but we can estimate. Assuming the demand curve is relatively inelastic, the new price will be higher than £2.00, and the quantity will be lower than 100 cups. A reasonable estimate, based on the diagram, is a new equilibrium price of £2.50 and a quantity of around 80 cups. (Note: a precise calculation requires more information about the supply curve.)

3. Effect on Quantity Supplied: The tax increases the cost of production for firms. This leads to a decrease in the quantity of coffee that firms are willing to supply at each price level. The supply curve shifts upwards, reflecting this increased cost. The diagram shows this shift in the supply curve.

4. Impact on Firm's Total Revenue: The impact on the firm's total revenue is ambiguous. The tax increases the price consumers pay, which could increase the firm's revenue per unit sold. However, the decrease in quantity sold could offset this increase.

The overall effect on total revenue depends on the price elasticity of demand. If demand is inelastic (as suggested by the diagram), the firm's total revenue might increase, even with the lower quantity sold. However, if demand is elastic, the decrease in quantity sold will outweigh the price increase, leading to a decrease in total revenue. Without knowing the exact elasticity, it's difficult to definitively say whether total revenue will increase or decrease. However, the diagram suggests a relatively inelastic demand, so a potential increase in total revenue is likely.

Answer:

PED = ((Q2 - Q1) / Q1) / ((P2 - P1) / P1)

Where:

• Q1 = Initial quantity demanded = 2000
• Q2 = New quantity demanded = 1600
• P1 = Initial price = £400
• P2 = New price = £450

PED = ((1600 - 2000) / 2000) / ((450 - 400) / 400)

PED = (-400 / 2000) / (50 / 400)

PED = (-0.2) / (0.125)

PED = -1.6

The Price Elasticity of Demand (PED) is -1.6. This indicates that demand is relatively elastic. A 1% increase in price leads to a 1.6% decrease in quantity demanded.

Explanation: A PED of -2 indicates that demand is elastic. This means that a 10% increase in price will lead to a proportionally larger decrease in the quantity demanded. Therefore, the firm's total revenue will fall.

Calculations:

1. Calculate the percentage change in quantity demanded: Since PED = (% change in quantity demanded) / (% change in price), we can rearrange to find the percentage change in quantity demanded: % change in quantity demanded = PED * % change in price = -2 * 10% = -20%. This means the quantity demanded will decrease by 20%.
2. Assume an initial quantity and price: Let's assume the initial quantity sold is 1000 phones at a price of £50 each. The initial total revenue is 1000 * £50 = £50,000.
3. Calculate the new quantity demanded: A 20% decrease in quantity demanded means the new quantity sold is 1000 - (20% of 1000) = 1000 - 200 = 800 phones.
4. Calculate the new price: The price is increased by 10%, so the new price is £50 + (10% of £50) = £50 + £5 = £55.
5. Calculate the new total revenue: The new total revenue is 800 * £55 = £44,000.
6. Calculate the percentage change in total revenue: % change in total revenue = ((New Total Revenue - Initial Total Revenue) / Initial Total Revenue) * 100 = ((£44,000 - £50,000) / £50,000) * 100 = (-£6,000 / £50,000) * 100 = -12%.

Conclusion: The firm's total revenue is expected to decrease by 12% as a result of the price increase, due to the elastic demand.