Given an economy with four goods: Eggs, Cotton Cloth, Yachts (fancy boats) and Apples with price...

 

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Given an economy with four goods: Eggs, Cotton Cloth, Yachts (fancy boats) and Apples with price elasticities of demand of -0.3, -2.5, -2.8 and -0.2 respectively, where Eggs and cotton cloth production is subsidized by the government and yachts and apple production is taxed by the government, how could welfare be potentially improved? Use a Deaton style analysis to evaluate what changes could improve the tax/subsidy policies. Be clear with what assumptions would be necessary to establish your final policy recommendations. Given an economy with four goods: Eggs, Cotton Cloth, Yachts (fancy boats) and Apples with price elasticities of demand of -0.3, -2.5, -2.8 and -0.2 respectively, where Eggs and cotton cloth production is subsidized by the government and yachts and apple production is taxed by the government, how could welfare be potentially improved? Use a Deaton style analysis to evaluate what changes could improve the tax/subsidy policies. Be clear with what assumptions would be necessary to establish your final policy recommendations.

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In this instance the price elasticities of demand for eggs cotton clothes yachts and apples are 03 2... View the full answer