Sam is interested in two goods, X and His indirect utility function is U* = Mpx...

 

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Sam is interested in two goods, X and His indirect utility function is U* = Mpx -0.9 pyº (same as U* = M /(px0.9 py1-0.9)) 0.9-1. where M is Sam's income, and px and py denote respectively the price of good X and the price of good Y. Sam's market demand function for good X is X*=0.9M/px - Find the (maximum) amount Sam would be willing to pay to avoid a per-unit tax on good X which would result in an increase in the price of good X from 1 dollar to 8 dollars, assuming his income is M-585 and price of good Y is equal to 3. Sam is interested in two goods, X and His indirect utility function is U* = Mpx -0.9 pyº (same as U* = M /(px0.9 py1-0.9)) 0.9-1. where M is Sam's income, and px and py denote respectively the price of good X and the price of good Y. Sam's market demand function for good X is X*=0.9M/px - Find the (maximum) amount Sam would be willing to pay to avoid a per-unit tax on good X which would result in an increase in the price of good X from 1 dollar to 8 dollars, assuming his income is M-585 and price of good Y is equal to 3.

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