Question: Lea's utility function is U = ln( x ) + 0.8 y where x denotes her consumption of good X and y denotes her consumption

Lea's utility function is

U = ln( x ) + 0.8 y

where x denotes her consumption of good X and y denotes her consumption of good Y.

Suppose the government imposes a per-unit tax on good X equal to 9 dollars. The price of good X charged by the sellers of good X is Px = 11 (and does not change due to the tax), the price of good Y is Py = 5 and Lea's income is M = 329.

How much money must we give Lea to compensate her for the price increase due to the 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!

ECO 364: International Trade Practice solving versions of the exchange economy and Ricardian models to see where the gains from trade come from. There are two countries, Home (H ) and Foreign (F ),...

Suppose that in an economy there are two consumers with labels i=1,2. The two consumers exchange only two commodities, with labels j=1, 2. The fixed total endowment of each commodity is labeled as e,...

Note: There are may be other questions related to this one. It is strongly recommended that write down your answer to this question in case you need to use it later. Consider an one person, two good,...

Exercise 1 - Simultaneous Public good game = = Consider two consumers (1, 2), each with income M to allocate between two goods. Good 1 provides 1 unit of consumption to its purchaser and a units of...

help needed PROBLEM IV. Ambrose's utility function is U ($1.32) = xix; where :1 is his consumption of good 1 and 1'2 is his consumption of good 2. The price of good 1 is 3, the prioe of good 2 is 4,...

!Solve the following problems. 1. An exchange economy has two dates t = 0, 1 and two states of nature s = 1,2 which will be revealed at date 1. Unlike the model in class, agents in this economy do...

Note : For this question you are required to draw well-labeled graphs. Please make sure that the graph is large in size so that all the details can be easily noted. Suppose a typical consumer is...

GO THROUGH THESE AND HELP ME SOLVE.... MICRO ECONOMICS WORKS 1. Question 5 (Choice) Mrs. Gordon has 3 sons. She spends $1013 on each boy during the holiday season to buy them chocolate and gummy...

QUESTION 3 You won $200M {$200,000,000} playing the lottery. Two charities have approached you for a donation. You summoned the directors of the two charities and informed them that they will play...

(a) What volume of air at 1.0 atm and 22C is needed to fi ll a 0.98-L bicycle tire to a pressure of 5.0 atm at the same temperature? (The 5.0 atm is the gauge pressure, which is the difference...

Visit the Websites and review the financial statements for DSG international (DSGiplc.com), Best Buy (BestBuy.com), and Circuit City (CircuitCity.com). Each of these companies is a retailer of...

How can cause-related sponsorship contribute to a companys communications strategy?

Catch My Drift, a sedan manufacturer, has introduced the Beeper-a new leisure car. Because the Beeper is being introduced as a leisure car, this implies that the car will be used primarily for the...

4. In what way will relationships in a system influence what is reported?

3. Mention three examples where you distorted information that you had taken from your memory and where others made you aware of the fact that you had distorted the information. Did it create a...

4. Think of two units of information you have received during the course of the day. Connect these two units of information and try to create completely new information that did not exist in the...