Suppose a consumer has an income of 10, and we have p = P2 = 1....
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Suppose a consumer has an income of 10, and we have p₁ = P2 = 1. Further, this consumer has 'standard' preferences (decreasing MRS), and chooses ₁ = 2 = 5 on the resulting budget line. a) Show this utility maximizing choice on a graph of the budget set with an indifference curve. Now suppose that the government imposes tax of $1.00 per unit of ₁. The con- sumer chooses point x₁ = 3, 24 on the resulting budget line. Show this outcome on your graph, including an indifference curve through the new point. Suppose a consumer has an income of 10, and we have p₁ = P2 = 1. Further, this consumer has 'standard' preferences (decreasing MRS), and chooses ₁ = 2 = 5 on the resulting budget line. a) Show this utility maximizing choice on a graph of the budget set with an indifference curve. Now suppose that the government imposes tax of $1.00 per unit of ₁. The con- sumer chooses point x₁ = 3, 24 on the resulting budget line. Show this outcome on your graph, including an indifference curve through the new point.
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Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
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