Question: You are a consultant to the government of Buttony The
You are a consultant to the government of Buttony. The government has decided to cut taxes on either apples, bananas, or cantaloupe, and it wants your input on which fruit would be the best choice for a tax cut. It provides you with the following information. What is your recommendation, and why?
Answer to relevant QuestionsLuxury goods often have much higher elasticities of demand than do goods purchased by a broad base of people. Why, then, are governments more likely to tax luxuries than these “staple” goods? Schmeezle and Schmoozle are two advisors for the government of Feldspar. Schmeezle says that since the elasticity of demand for granite countertops is –3 and the elasticity of demand for sinks is –1.5, taxes should be ...Over time, more women have become the primary (or sole) wage earners in their households. How does this fact complicate the empirical analysis of the effects of taxation on women’s labor supply? Why does the EITC exacerbate the marriage penalty for low-in-come workers? Suggest an alternative method of calculating the EITC that reduces this penalty. The government introduces a tax incentive program in which the first $5,000 of savings can be tax-deferred. Draw the resulting budget constraint that illustrates the trade-off between current and future consumption.
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