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 lumpsum tax on A. By using a graphical analysis, compare these two taxation policies in terms of “excess burden”.
Solutions
Rahul Sunny answered 8 months agoRelated 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 lump-
sum 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...
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