Aria consumes only potatoes and cheese. When the price of potatoes was $9 a sack and the
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Question:
Aria consumes only potatoes and cheese. When the price of potatoes was $9 a sack and the price of cheese was $5 a packet, he spent his entire income to buy 5 sacks of potatoes and 10 packets of cheese per month.
New: Now, the government subsidizes potatoes. Market prices are the same, but consumers get $5 in subsidy for every sack of potatoes they buy. To pay for this subsidy, the government has introduced an income tax of $20 a month.
a. What is Aria’s new budget equation?
b. Can Aria afford more or less on potatoes and cheese than before?
Related Book For
Macroeconomics Principles Applications And Tools
ISBN: 9780134089034
7th Edition
Authors: Arthur O Sullivan, Steven M. Sheffrin, Stephen J. Perez
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