aragram rates a person's initial budget line Bo. The horizontal axis measures units of good X, while the vertical axis measures a bundle of all other goods (Y) in dollars. A tax is imposed on X causing the budget line to pivot from Bo to B₁. a. This person's total income is M = $ b. The price of good X is P = $_ c. The unit tax on good X is T = $_ d. An equivalent ad valorem tax would be at the rate of t = per unit. %. e. On the diagram, show the income and substitution effect as the consumer adjusts to the tax. f. On the diagram, show the Compensating Variation of the total burden of the tax as $TB. g. On the diagram, show the total amount of tax collected from this person as $R. h. On the diagram show the Compensating Variation of the excess burden of the tax as $EB.
aragram rates a person's initial budget line Bo. The horizontal axis measures units of good X, while the vertical axis measures a bundle of all other goods (Y) in dollars. A tax is imposed on X causing the budget line to pivot from Bo to B₁. a. This person's total income is M = $ b. The price of good X is P = $_ c. The unit tax on good X is T = $_ d. An equivalent ad valorem tax would be at the rate of t = per unit. %. e. On the diagram, show the income and substitution effect as the consumer adjusts to the tax. f. On the diagram, show the Compensating Variation of the total burden of the tax as $TB. g. On the diagram, show the total amount of tax collected from this person as $R. h. On the diagram show the Compensating Variation of the excess burden of the tax as $EB.
Principles of Economics (MindTap Course List)
8th Edition
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter21: The Theory Of Consumer Choice
Section: Chapter Questions
Problem 1QR
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