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1(a) If u=min(3x,y) and I=250 and py=5, what are the income and substitution effects of an decrease in the price of x from $8 to $6? Show your work. (b) for the utility function u=2x+y1/2, for l=250 and initial prices px=6 and py=5, show that a sales tax of $2 per unit of x is worse in terms of utility than the equivalent income tax (i.e. the income tax where the individual pays the same amount of tax as the sales tax case).

1(a) If u=min(3x,y) and I=250 and py=5, what are the income and substitution effects of an decrease in the price of x from $8 to $6? Show your work. (b) for the utility function u=2x+y1/2, for l=250 and initial prices px=6 and py=5, show that a sales tax of $2 per unit of x is worse in terms of utility than the equivalent income tax (i.e. the income tax where the individual pays the same amount of tax as the sales tax case).

MATLAB: An Introduction with Applications
MATLAB: An Introduction with Applications
6th Edition
ISBN:9781119256830
Author:Amos Gilat
Publisher:Amos Gilat
Chapter1: Starting With Matlab
Section: Chapter Questions
Problem 1P
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1(a) If u=min(3x,y) and I=250 and py=5, what are the income and substitution effects of an decrease in the price of x from $8 to $6? Show your work. (b) for the utility function u=2x+y1/2, for l=250 and initial prices py=6 and py=5, show that a sales tax of $2 per unit of x is worse in terms of utility than the equivalent income tax (i.e. the income tax where the individual pays the same amount of tax as the sales tax case).
Transcribed Image Text:1(a) If u=min(3x,y) and I=250 and py=5, what are the income and substitution effects of an decrease in the price of x from $8 to $6? Show your work. (b) for the utility function u=2x+y1/2, for l=250 and initial prices py=6 and py=5, show that a sales tax of $2 per unit of x is worse in terms of utility than the equivalent income tax (i.e. the income tax where the individual pays the same amount of tax as the sales tax case).
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