Question
If the government imposes a quantity tax on the consumption of a good, it
means that the consumer has to pay for each unit of the good its price plus
the tax. For example, if the price of a chocolate bar is $5 and the government
imposes a tax of 20 cents on the consumption of a chocolate bar, then the
actual price the consumer pays for a chocolate bar is $5 + $0.2 = $5.20.
Suppose there are two goods available for consumption, good 1 and good
2, and that the government taxes consumption of good 2 that is in excess
of quantity x2 (that is, consumption of good 2 up to quantity x2 is exempt
of tax). Denote by t the amount of dollars a consumer has to pay for every
unity she consumes in excess of x2.
Draw the budget set of a consumer with income m. Is the slope of the
budget line constant?
means that the consumer has to pay for each unit of the good its price plus
the tax. For example, if the price of a chocolate bar is $5 and the government
imposes a tax of 20 cents on the consumption of a chocolate bar, then the
actual price the consumer pays for a chocolate bar is $5 + $0.2 = $5.20.
Suppose there are two goods available for consumption, good 1 and good
2, and that the government taxes consumption of good 2 that is in excess
of quantity x2 (that is, consumption of good 2 up to quantity x2 is exempt
of tax). Denote by t the amount of dollars a consumer has to pay for every
unity she consumes in excess of x2.
Draw the budget set of a consumer with income m. Is the slope of the
budget line constant?
Answers
100
Related Questions
Let x1 ≥ 0 and x2 ≥ 0 be the levels of consumption of good 1 and good 2, respectively. Income is I =...
A country currently imports 10 million units of a good at a price of $10 for each unit. If the gover...
Which is a positive incentive?(1 point) Responses The federal government imposes a $0.10 tax on ener...
Which is a positive incentive?(1 point)
Responses
The federal government imposes a $0.10 tax on...