Reference no: EM131113142

1. An Op-Ed article by Martin Schmidt published in the New York Times on October 19th 2006 argued in favor of a tax on drive-through food orders as a method for reducing obesity (article attached). He suggests a 10% tax on the amount of drive-through food purchases. Instead of a percentage tax, consider a flat tax on each drive-through order (this type of tax fits with our taxation model at the end of chapter 9). Do you think this proposal would reduce obesity? Why? Start your analysis by showing the impact of the tax on the quantity of drive through meals consumed. Also consider the spillovers this tax may have on other types of food consumption.

2. Budget Constraints

a. Assume that housing and food are the only goods available. A family's budget is $800 a month. Assume the price of food is equal to $4 and the price of housing is equal to $5. Draw the budget constraint for this family.

b. Draw the budget constraint if the family is given a TANF grant of $1200 a month and prices and other income are the same as in part A. There is no restriction on how TANF grants may be spent.

c. Draw the budget constraint if the family is given a housing voucher worth $1200 a month and prices and other income are the same as in part A. Housing vouchers may only be spent on housing.

d. Draw the budget constraint if the family is given public housing worth $1200 a month and prices and other income are the same as in part A. Assume public housing does not cost the family anything. Also assume that if a family lives in public housing they use their own money to increase the size of the public housing unit they are renting.

Attachment:- Article.rar