1. The diagram below illustrates a person's initial budget line Bo. The horizontal axis measures units ofgood X, while the vertical axis measures a bundle of all other goods (Y) in dollars. A tax is imposed onX causing the budget line to pivot from Bo to B₁.a. This person's total income is M = $_b. The price of good X is P = $_C. The unit tax on good X is T = $_Y($)1300120011001000900800700600500400300200100per unit.d. An equivalent ad valorem tax would be at the rate of t =%.e.On the diagram, show the income and substitution effect as the consumer adjusts to the tax.On the diagram, show the Compensating Variation of the total burden of the tax as $TB.On the diagram, show the total amount of tax collected from this person as $R.On the diagram show the Compensating Variation of the excess burden of the tax as $EB.f.g.h.B₁0 2 4 6 8 10 12Во20X (units)

Utility is the satisfaction that is derived from consumption of commodities. The indifference curve…

aragram rates a person's initial budget line Bo. The horizontal axis measures units of good X, while the vertical axis measures a bundle of all other goods (Y) in dollars. A tax is imposed on X causing the budget line to pivot from Bo to B₁. a. This person's total income is M = $ b. The price of good X is P = $_ c. The unit tax on good X is T = $_ d. An equivalent ad valorem tax would be at the rate of t = per unit. %. e. On the diagram, show the income and substitution effect as the consumer adjusts to the tax. f. On the diagram, show the Compensating Variation of the total burden of the tax as $TB. g. On the diagram, show the total amount of tax collected from this person as $R. h. On the diagram show the Compensating Variation of the excess burden of the tax as $EB.

aragram rates a person's initial budget line Bo. The horizontal axis measures units of good X, while the vertical axis measures a bundle of all other goods (Y) in dollars. A tax is imposed on X causing the budget line to pivot from Bo to B₁. a. This person's total income is M = $ b. The price of good X is P = $_ c. The unit tax on good X is T = $_ d. An equivalent ad valorem tax would be at the rate of t = per unit. %. e. On the diagram, show the income and substitution effect as the consumer adjusts to the tax. f. On the diagram, show the Compensating Variation of the total burden of the tax as $TB. g. On the diagram, show the total amount of tax collected from this person as $R. h. On the diagram show the Compensating Variation of the excess burden of the tax as $EB.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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