Question

In: Economics

Consider an economy in which an individual (A) is consuming two goods (X and Y). The...

Consider an economy in which an individual (A) is consuming two goods (X and Y). The
government is considering two alternative taxation policies: (a) taxing good X; (b) putting a lump-
sum tax on A. By using a graphical analysis, compare these two taxation policies in terms of
“excess burden”.

Solutions

Expert Solution

Rahul Sunny answered 10 months ago
Next > < Previous

Related Solutions

Consider an economy in which an individual (A) is consuming two goods (X and Y). The...
Consider an economy in which an individual (A) is consuming two goods (X and Y). The government is considering two alternative taxation policies: (a) taxing good X; (b) putting a lumpsum tax on A. By using a graphical analysis, compare these two taxation policies in terms of “excess burden”.
Consider an economy in which an individual (A) is consuming two goods (X and Y). The...
Consider an economy in which an individual (A) is consuming two goods (X and Y). The government is considering two alternative taxation policies: (a) taxing good X; (b) putting a lumpsum tax on A. By using a graphical analysis, compare these two taxation policies in terms of “excess burden”
Consider an exchange economy with two individuals, A and B, and two goods, x and y....
Consider an exchange economy with two individuals, A and B, and two goods, x and y. Individual A has utility function UA(xA; yA) = xAyA, and individual B has utility function UB(xB; yB) = xByB. If there are 10 units of x and 10 units of y in the market, what is the equation of the contract curve? Group of answer choices yA = 0.5xA yA = 2xA yA = 5xA yA = xA
Consider an economy with two goods, x and y, and two agents, Anna and Bert. Anna...
Consider an economy with two goods, x and y, and two agents, Anna and Bert. Anna and Bert wish to trade with one another in order to maximize their individual utilities. We will consider how their trading decisions depend on the initial endowments of X and Y and on their utility functions. Suppose Anna is endowed with one unit of X and half a unit of Y and Bert is endowed with one unit of X and one and a...
1. Consider the preferences of an individual over two goods, x and y, with prices px...
1. Consider the preferences of an individual over two goods, x and y, with prices px and py and income I. (a) If the individual's preferences can be represented by the utility function u(x,y) =2x1/2 + y, what is the marginal rate of substitution? What does this MRS imply about how this consumer would trade y for x? Are the underlying preferences homothetic (explain)? Graphically illustrate a typical indifference curve and explain how you know the shape. (b) If the...
Suppose there are two goods in an economy, X and Y. Prices of these goods are...
Suppose there are two goods in an economy, X and Y. Prices of these goods are Px and Py, respectively. The income of the only agent (consumer) in the economy is I. Using this information, answer the following questions: a. Write down the budget constraint of the consumer. Draw it on a graph and label the critical points accordingly. Provide a verbal explanation of why all income is spent, mentioning the underlying assumption for this outcome. b. Define substitution and...
Consider an exchange economy with two agents, A, B, and two goods,  x, y. A's endowment is...
Consider an exchange economy with two agents, A, B, and two goods,  x, y. A's endowment is x = 6, y = 4, and B's endowment is x = 4, y = 6. (a) Suppose that A has utility function  u(x, y) = x + y  and B has utility function u(x, y) = xy. Find a competitive equilibrium allocation (CEA) and associated equilibrium prices. What difference would it make if A's endowment is x = 3, y = 1, and B's endowment...
3. Consider a pure exchange economy with two goods, wine (x) and cheese (y) and two...
3. Consider a pure exchange economy with two goods, wine (x) and cheese (y) and two con- sumers, A and B. Let cheese be the numeraire good with price of $1. Consumer A’s utility function is UA(x,y) = xy and B’s utility function is UB(x,y) = min[x,y]. A has an initial allocation of 10 x and no y, and B has an initial allocation of 10 units of y and no x. (a) Put wine x on the horizontal axis...
Consider an individual making choices over two goods, x and y with prices px = 3...
Consider an individual making choices over two goods, x and y with prices px = 3 and py = 4, and who has the income I = 120 and her preferences can be represented by the utility function U(x,y) = (x^2)(y^2). Suppose the government imposes a sales tax of $1 per unit on good x: (a) Calculate the substitution effect and Income effect (on good x) after the price change. Also Illustrate on a graph. (b) Find the government tax...
Consider an individual making choices over two goods, x and y with prices px and py,...
Consider an individual making choices over two goods, x and y with prices px and py, with income I , and the utility function u(x,y) = xy1/2.You already know that this yields the demand functions x∗ = 2I 3px and y∗ = I 3py (no need to calculate). (a) Find the indirect utility function, expenditure function and the compensated (Hicksian) demands for x and y. Show your work. (b) Use your expenditure function to find the compensating variation for a...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT