Question

In: Economics

Penny spends I = $48 on cigarettes (xc) and milk (xm), where the before-tax price of...

Penny spends I = $48 on cigarettes (xc) and milk (xm), where the before-tax price of cigarettes is $5/pack and the before tax price of milk is $4/jug.

If cigarettes face a quantity tax of $3/pack and milk is not taxed at all, what is the slope of Penny’s budget constraint over (xc,xm) bundles (so xc is on the horizontal axis)? (Don’t forget to include a minus sign when entering your answer)

Solutions

Expert Solution

Money income = $48

Budget constraint gives us the combination of goods and services that a consumer is able to afford given his income.

When tax is imposed on a product, its price increases by the amount of the tax. Therefore, in this case the new price of Cigarettes is $5+$3 = $8

  1. ***Please refer to the handwritten notes

Rahul Sunny answered 2 years ago
Next > < Previous

Related Solutions

Background Information: A tax on Cigarettes introduced in Mexico in 2012 increased the price of Cigarettes...
Background Information: A tax on Cigarettes introduced in Mexico in 2012 increased the price of Cigarettes by about 10%. An evaluation of the first two years of this measure found that Cigarette consumption fell on average by 7.6%, with a larger decrease (11.7%) in low income households. The study also estimated an increase in consumption of alternatives to smoking, particularly Nicotine patches, of 2.1% (AYA, 2017) Question 1: Draw a demand and supply diagram for the market for Cigarettes. Name...
Juanita earns $56,000 a year before-tax, spends $31,500 per year on consumption, and saves the rest...
Juanita earns $56,000 a year before-tax, spends $31,500 per year on consumption, and saves the rest at the end of the year. She also has $14,400 in her savings account. She wants to retire in 25 years with a million dollars. Her average tax rate is 25%, and her marginal tax rate is 35%. What before-tax rate of return does she need to make on her investments in order to achieve her goal? a. 8.99% b. 13.71% c. 5.13% d....
With a purchase price of $350,000, a warehouse provides for an initial before-tax cash flow of...
With a purchase price of $350,000, a warehouse provides for an initial before-tax cash flow of $30,000, which grows by 6 percent per year. If the before-tax equity reversion after four years equals $90,000, and an initial equity investment of $175,000 is required, what is the IRR on the project? If the required going-in levered rate of return on the project is 10 percent, should the project be undertaken? kindly provide the calculation steps
With a purchase price of $350,000, a warehouse provides for an initial before-tax cash flow of...
With a purchase price of $350,000, a warehouse provides for an initial before-tax cash flow of $30,000, which grows by 6 percent per year. If the before-tax equity reversion after four years equals $90,000, and an initial equity investment of $175,000 is required, what is the IRR on the project? If the required going-in levered rate of return on the project is 10 percent, should the project be undertaken? please provide the calculation steps
Where do I find income tax expense and cash paid for taxes on a profit and...
Where do I find income tax expense and cash paid for taxes on a profit and loss statement that's part of a 10-K? Can an example be provided from an SEC company?
Where do I find price/earnings ratio (PE) and how do I equate it in excel? Is...
Where do I find price/earnings ratio (PE) and how do I equate it in excel? Is it in the income sheet? If so, what is the formula?
I am having a little difficulty understanding how E&P applies to the tax law and where...
I am having a little difficulty understanding how E&P applies to the tax law and where it is used on the tax return. I read that E&P has been included in the tax code since 1916, but if it includes income that is typically nontaxable, what is it used to calculate in the tax return?  
For a 7-year annual bond with a coupon rate of 8%, par value $100, and current market price $120, what is the cost of debt before tax?
For a 7-year annual bond with a coupon rate of 8%, par value $100, and current market price $120, what is the cost of debt before tax?
QD=8000-2PX+0.4I+2PY-4PZ Where QD = quantity demanded of good X PX = price of good X I...
QD=8000-2PX+0.4I+2PY-4PZ Where QD = quantity demanded of good X PX = price of good X I = consumer income, in thousands PY = price of good Y PZ = price of good Z a. Based on the demand curve above, is X a normal or an inferior good? b. Based on the demand curve above, what is the relationship between good X and good Y? c. Based on the demand curve above, what is the relationship between good X and...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT