A state legislature utterly disgusted by the spread of gun violence imposes a 100% sales tax surcharge on the sale of firearms and ammunition. (A 100% tax effectively doubles the price.) If the before- and after-tax (non-zero consumption) of "guns and ammo" is the same for some consumers, is this information sufficient to determine whether "guns and amm is normal, inferior, or neither for these same consumers? Use an indifference curve diagram with "all other goods" (abbreviated AOG) plotted along the vertical axis and "guns and ammo" plotted along the horizontal axis to justify your answer. Please carefully draw the "before-tax" and "after-tax" budget lines. If nonzero, carefully label the substitution and income effects. {Hint: Remember that the 100% sales tax surcharge doubles the price of "guns and ammo." Please keep that in mind when you draw the "before" and "after" budget lines.}

A state legislature utterly disgusted by the spread of gun violence imposes a 100% sales tax surcharge on the sale of firearms and ammunition. (A 100% tax effectively doubles the price.) If the before- and after-tax (non-zero consumption) of "guns and ammo" is the same for some consumers, is this information sufficient to determine whether "guns and amm is normal, inferior, or neither for these same consumers? Use an indifference curve diagram with "all other goods" (abbreviated AOG) plotted along the vertical axis and "guns and ammo" plotted along the horizontal axis to justify your answer. Please carefully draw the "before-tax" and "after-tax" budget lines. If nonzero, carefully label the substitution and income effects. {Hint: Remember that the 100% sales tax surcharge doubles the price of "guns and ammo." Please keep that in mind when you draw the "before" and "after" budget lines.}

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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