Exercise I.1 The figure below shows the utility function of a representative individual as a function of its income. The government wants to apply the ability-to-pay-principle and burden every person with the same relative loss in utility: To raise sufficient revenues, the gorernment must tax away 50 °% of individual utility. Calculate the tax burden for individuals with an income of 4. 10 and 20 €. Describe the tax schedule that emerges. 22 21

Exercise I.1 The figure below shows the utility function of a representative individual as a function of its income. The government wants to apply the ability-to-pay-principle and burden every person with the same relative loss in utility: To raise sufficient revenues, the gorernment must tax away 50 °% of individual utility. Calculate the tax burden for individuals with an income of 4. 10 and 20 €. Describe the tax schedule that emerges. 22 21

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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