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8. LO 4 Show that the consumer is better off with a lump-sum tax rather than a proportional tax on wage income (as in question 3) given that either tax yields the same revenue for the government. You must use a diagram to show this. ( Hint: The consumption bundle the consumer chooses under the proportional tax must be just affordable given the lump-sum tax.)

8. LO 4 Show that the consumer is better off with a lump-sum tax rather than a proportional tax on wage income (as in question 3) given that either tax yields the same revenue for the government. You must use a diagram to show this. ( Hint: The consumption bundle the consumer chooses under the proportional tax must be just affordable given the lump-sum tax.)

Principles of Microeconomics
Principles of Microeconomics
7th Edition
ISBN:9781305156050
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter12: The Design Of The Tax System
Section: Chapter Questions
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Just need number 8 answered...#7 is there for reference.

8. LO 4 Show that the consumer is better off with a lump-sum tax rather than a proportional tax on wage income (as in question 3) given that either tax yields the same revenue for the government. You must use a diagram to show this. ( Hint: The consumption bundle the consumer chooses under the proportional tax must be just affordable given the lump-sum tax.)
Transcribed Image Text:8. LO 4 Show that the consumer is better off with a lump-sum tax rather than a proportional tax on wage income (as in question 3) given that either tax yields the same revenue for the government. You must use a diagram to show this. ( Hint: The consumption bundle the consumer chooses under the proportional tax must be just affordable given the lump-sum tax.)
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