Find the optimal consumption bundle when a representative consumer’s utility function is given by and the prices are given by . The income of the consumer is given by . Present your results nicely on a graph with the budget line and the equilibrium point clearly shown. The governor now proposed a 10% sales tax that affects both the commodities. How will the optimal consumption bundle change after the sales taxes are imposed? Update the graph in Question 1 given the new sets of results. The leader of the state legislature proposes that the governor’s proposal of a 10% across the board sales tax must be replaced by a 10% income tax. How will the optimal consumption bundle change after the income taxes are imposed? Update the graph in Question 1 and Question 2 given the new sets of results. A compromise is now reached between the Governor and the Leader of the Legislature. It is decided that there will be a 5% across the board sales taxes and a 5% income tax. How will the optimal consumption bundle change after this compromise is reached? Update the graph in Question 1, Question 2, and Question 3 given the new sets of results. Consider Questions 2 through 4 and compute the total tax revenue of the government in these scenarios. Present your results nicely in a simple table. Consider Questions 1 through 4 and compute the total utility of the consumer in these scenarios. Present your results nicely in a simple table. Write a simple report (based on Questions 1 through 6) that can be printed in a local newspaper and the report must be understood by anyone who does not have a formal training in economics. Your report/article must not be more than 500 words long and must be written for the ordinary citizen in plain and straightforward English.
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