Question: An individual has the utility function u = 2 x y + 1. The prices are px = py = 1 and the income is

An individual has the utility function u = 2 x y + 1. The prices are px = py = 1 and the income is $ 20. a) Find the basket that maximizes its usefulness. b) The government imposes a unit tax of $ 1 on property x. Find the news consumption of x. c) How much revenue does the government get from this tax?

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Economics Questions!

I'm having a hard time with this question, thanks for helping. An individual has the utility function u = min (x, y). His income is $ 12. Initially, the prices were px = 4 and py = 1, and the...

Utility Function: U = ln (x) + ln (z) Budget Constraint: 120 = 2x + 3z (a) Find the optimal values of x and z (b) Explain in words the idea of a compensating variation for the case where the budget...

Consider the utility function u = 2 x + 4 y . ( a ) Find ordinary ( Marshallian ) demand for the two goods as a function of income and prices. ( b ) Find compensated ( Hicksian ) demand. ( c ) Find...

please can you help calculate this problem and provide explanation 1. Mr. A derives utility from martinis (m) in proportion to the number he drinks: U(m) = m (1) Mr. A is particular about his...

mmacroecon Question 1 Let an individual's utility function be given as u(x1, x2) = 2 x1 x2 . a) Compute the Marginal Rate of Substitution. b) Initially, the individual consumes bundle (x1 = 100, x2 =...

hhh Question 1 Let an individual's utility function be given as u(x1, x2) = 2 x1 x2 . a) Compute the Marginal Rate of Substitution. b) Initially, the individual consumes bundle (x1 = 100, x2 = 12.5)....

man598 4. (20 points) Consider the following model of the labor market, with labor supply Ls and labor demand Ld respectively given as a function of the wage by: Ls = aw +l Ld = f w: (a) (2 points)...

eco9 Read Case 5-1: Netflix on pages 181-182. Complete one of the following for your original post. Responses to peers can include additional examples from personal experience, additional support for...

The chapter analyzes Fishers model for the case in which the consumer can save or borrow at an interest rate of r and for the case in which the consumer can save at this rate but cannot borrow at...

The Outsider Company, Inc. provided the following information regarding its inventory for the year ended December 31, 2015. It made all of the purchases before any sales transactions for the year....

ivis D 0 2 2 6 of 3 1 A company's own stock that it has issued and repurchased is called A . dividend stock. B . treasury stock. C . issued stock. D . outstanding stock.

what are Rolex's Strategic techniques imposed relative to rivalries and / or cooperative arrangments

What is the strategic importance of the selection function for an organization?

How would you go about designing a selection process for the Pacific Rim operations from scratch?

Is it important to have similar hiring processes for different regions of the same company? Why or why not?