1. If Australia were to charge a carbon/emission tax for coal powered electricity it is believed this would raise the price of electricity for all consumers. The government has plans to respond to the higher price with tax breaks for lower income groups. a. Show how both elements of this policy (higher price + compensation) work using our model. b. If consumers are compensated back to their original utility - then what is the point of the higher prices? 2. During the pandemic quantity restrictions were put in place for many items for example milk. The below diagram shows the budget constraint and utility for a given consumer for milk and all other goods during the pandemic. a. If the quantity of milk that a consumer is restricted to buying is B - is the consumer better off, worse off or just the same. Explain b. How much is the consumer willing to pay to buy additional milk? Explain and show graphically. AOG BC₁ B A U₁ L of milk

1. If Australia were to charge a carbon/emission tax for coal powered electricity it is believed this would raise the price of electricity for all consumers. The government has plans to respond to the higher price with tax breaks for lower income groups. a. Show how both elements of this policy (higher price + compensation) work using our model. b. If consumers are compensated back to their original utility - then what is the point of the higher prices? 2. During the pandemic quantity restrictions were put in place for many items for example milk. The below diagram shows the budget constraint and utility for a given consumer for milk and all other goods during the pandemic. a. If the quantity of milk that a consumer is restricted to buying is B - is the consumer better off, worse off or just the same. Explain b. How much is the consumer willing to pay to buy additional milk? Explain and show graphically. AOG BC₁ B A U₁ L of milk

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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