1-a Answer following questions by using the Cobb-Douglas utility function u= xx and assuming that the price of good 1 is pi and good 2 is p2. Assume 0< a<1, pi>0, p2>0, and income I>0. Suppose that we consider a tax on housing. We can analyze the impact of tax by analyzing the consumption of square feet of housing (x1) and the dollars of "other goods consumption" (x2). Suppose that t dollar of tax is imposed per square feet of housing. Show graphically and explain in words, how much the total tax revenue (T), the consumer would be willing to pay to remove such a tax (L), and the dead weight loss would be by drawing the indifference curve of the consumer.
1-a Answer following questions by using the Cobb-Douglas utility function u= xx and assuming that the price of good 1 is pi and good 2 is p2. Assume 0< a<1, pi>0, p2>0, and income I>0. Suppose that we consider a tax on housing. We can analyze the impact of tax by analyzing the consumption of square feet of housing (x1) and the dollars of "other goods consumption" (x2). Suppose that t dollar of tax is imposed per square feet of housing. Show graphically and explain in words, how much the total tax revenue (T), the consumer would be willing to pay to remove such a tax (L), and the dead weight loss would be by drawing the indifference curve of the consumer.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
Transcribed Image Text:1-a
Answer following questions by using the Cobb-Douglas utility function u=
xx and assuming that the price of good 1 is pi and good 2 is p2. Assume 0<
a<1, pi>0, p2>0, and income I>0.
Transcribed Image Text:Suppose that we consider a tax on housing. We can analyze the impact of tax by
analyzing the consumption of square feet of housing (x1) and the dollars of
"other goods consumption" (x2). Suppose that t dollar of tax is imposed per
square feet of housing. Show graphically and explain in words, how much the
total tax revenue (T), the consumer would be willing to pay to remove such a tax
(L), and the dead weight loss would be by drawing the indifference curve of the
consumer.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps with 4 images
Recommended textbooks for you
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education