Change in budget line-increase in tax by government

Reference no: EM1316164

Suppose M=30, P1=2, P2=3.

a) The government wishes to impose a quantity (Per unit) tax of $0.25 on good 1.Show the effect of imposing this tax in a clearly labelled graph containing before and after budget lines.

b) Suppose instead that the government wishes to impose a value tax of $0.25 on each dollar of the consumer's expenditure on good 1.Show the effect of imposing this tax in a graph containing before and after budget lines.

c) Can we say which of these is better for a rational consumer? Explain.

Reference no: EM1316164

Questions Cloud

Elimination or substitution method to solve the equations : Elimination or substitution method to solve the equations.

Computation of financial and operating levarages : Computation of financial and operating and combined levarages and Fastron has 1 million shares of common stock outstanding

Calculating confidence interval : Calculate a 95% confidence interval for the population mean, based on the sample 10, 12, 13, 14, 15, 16, and 49.

Calculate chi-square is less than the critical value : Testout the significance of the sample correlation also develop regression equation with scatter plot. Calculate chi-square is less than the critical value

Change in budget line-increase in tax by government : Suppose instead that the government wishes to impose a value tax of $0.25 on each dollar of the consumer's expenditure on good 1.Show the effect of imposing this tax in a graph containing before and after budget lines.

Evaluate the price of stock using dividend discount model : Evaluate the price of stock using dividend discount model and how much are you willing to pay for the stock

The probability that a sheet selected at random : The population of lengths of aluminium-coated steel sheets is normally distributed with a mean of 30.05 inches and a standard deviation of 0.2 inches.

Evidence of the population mean : By using the 0.10 level of significance, is there evidence that the population mean is above the $300?

Evaluate the book value per share : Evaluate the book value per share and value of share using dividend discount model - what value would you assign to this stock?

User Account

All Pages