A consumer has the utility function U(X,Y)= X0.4 y0.6. Her income is $100000 and she faces...

 

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A consumer has the utility function U(X,Y)= X0.4 y0.6. Her income is $100000 and she faces prices Px=5 and Py=10. Would this consumer prefer to be taxed on good Y at $2 per unit or a revenue equivalent income tax? Graphically illustrate your answer. A consumer has the utility function U(X,Y)= X0.4 y0.6. Her income is $100000 and she faces prices Px=5 and Py=10. Would this consumer prefer to be taxed on good Y at $2 per unit or a revenue equivalent income tax? Graphically illustrate your answer.

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