1-Using the following budget constraint: 600 = 1X + 2Y, Utility U = √XY A. How many Xs and Ys do you buy, how do you divide your budget, and what is the level of utility achieved? B. The government grants a Subsidy (the opposite of a tax) of $1 on Y. C. What are the new quantities of X and Y purchased? D. What is the total amount the government spends on the Subsidy? E. What is the level of Utility achieved? F. If the same amount of Subsidy is added to income would you achieve a higher utility level? Calculate, Graph and Explain using the logic of the Lump-Sum Principle we saw in class

1-Using the following budget constraint: 600 = 1X + 2Y, Utility U = √XY A. How many Xs and Ys do you buy, how do you divide your budget, and what is the level of utility achieved? B. The government grants a Subsidy (the opposite of a tax) of $1 on Y. C. What are the new quantities of X and Y purchased? D. What is the total amount the government spends on the Subsidy? E. What is the level of Utility achieved? F. If the same amount of Subsidy is added to income would you achieve a higher utility level? Calculate, Graph and Explain using the logic of the Lump-Sum Principle we saw in class

ECON MICRO

5th Edition

ISBN:9781337000536

Author:William A. McEachern

Publisher:William A. McEachern

Chapter6: Consumer Choice And Demand

Section: Chapter Questions

Problem 3.10P

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a. Assume that the elasticity of demand for Fanta is -0.5 while the elasticity of supply is 0.7. Assuming further that a tax of K10 is applied on each bottle of Fanta sold, how much of this will be borne by producers. b. Assume that the price of good X is K10 while that of good Y is K20. A consumer has allocated consumption between the two goods in such a way that the marginal utility of X is 15 utils and that of Y is 25 utils. Is this an optimal consumption bundle? If not, what should the consumer do to reach the optimum?
27. If the demand for a pack of cigarettes is Q=50-$5P For a typical smoker and the price per pack is $8, how many packs of cigarettes does the person buy? What is his/her consumer surplus?
only typed answer A consumer has inverse demand of p=15−1q for a good and the market price is $4.00. Calculate consumer surplus and the total value of the good for the corresponding quantity consumed. Consumer surplus is $enter your response here. (Enter your response rounded to two decimal places.) The consumer's expenditure for the good is $enter your response here. (Enter your response rounded to two decimal places.)
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Suppose Jolene buys apples weekly. If the price of apples were to drop, Jolene would experience in . a decrease an increase a decrease an increase a decrease total revenue consumer surplus her budget constraint marginal utility willingness to pay Suppose the government levies a tax of $0.50 per pack on the buyers of cigarettes. Suppose also that the price elastic- ity of demand for cigarettes is 1.2 and the price elasticity of supply is 0.7. Because this tax is levied on the sale of a speciﬁ c good, it is an excise tax. a progressive tax. a regressive tax. a proportional tax. a lump-sum tax. After this tax is levied, total surplus will , and the price received by producers (not including the tax) will . increase decrease increase decrease increase increase by exactly $0.50 fall by exactly $0.50 fall by less than $0.50 fall by less than $0.50 increase by more than $0.50 If economists were to study the tax incidence in this cigarette market, they would…
5. Consider an economy with two goods, A and B. Suppose the price of good A is p and let the price of good B be 1. There is a large number of identical consumers. The indifference curves of consumers have the usual shape with diminishing marginal rate of substitution between the two goods. Suppose the government must raise a tax revenue of R, and can do this either by imposing a per-unit tax of t on good A, or by imposing a lump-sum tax T on each consumer. Which policy would the consumers prefer? Explain your reasoning carefully, using any appropriate diagram, and explain the intuition behind your result.
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