Consider the consumption function: C = 120+ 0.8Yd where Yd is disposable income. a) Write down expressions for C, in terms of national income Y, when there is: i. No tax ii. A lump sum tax of £100 iii. A proportional tax in which the proportion is 0.25. b) Sketch all three functions on the same diagram, over the range 0≤Y≤800, and briefly describe any differences or similarities between them.

Consider the consumption function: C = 120+ 0.8Yd where Yd is disposable income. a) Write down expressions for C, in terms of national income Y, when there is: i. No tax ii. A lump sum tax of £100 iii. A proportional tax in which the proportion is 0.25. b) Sketch all three functions on the same diagram, over the range 0≤Y≤800, and briefly describe any differences or similarities between them.

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

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Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Consider the consumption function:
C 120+ 0.8Yd
where Yd is disposable income.
a) Write down expressions for C, in terms of national income Y, when there is:
i. No tax
ii. A lump sum tax of £100
iii. A proportional tax in which the proportion is 0.25.
b) Sketch all three functions on the same diagram, over the range 0≤Y≤800, and
briefly describe any differences or similarities between them.

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Step 2: a.i. Expression of C when there is no tax

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Step 3: a.ii. Expression of C when there is a lumpsum tax of £100

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Step 4: a.iii. A Proportional tax is implied

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Step 5: b. Sketch three cost function and brief explanation

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