Illustrate general equilibrium and the Laffer curve in the context of a repre- sentative consumer with a utility function: U(C, 1) = ln(C) + In(1) that he or she maximises subject to a constraint: C = w(1 – t) (hl) + π where w, h, l, C, t and π are wages, hours of time available, leisure, consumption, tax rate, and dividend income. The production function for this economy is given by Y = C +G=A(h − 1)¹/² Assume that h = 1, A = 1 and that the government has a balanced budget. (c) Either analytically or from your Laffer curve plot, find the value of t that maximizes tax revenue.

Illustrate general equilibrium and the Laffer curve in the context of a repre- sentative consumer with a utility function: U(C, 1) = ln(C) + In(1) that he or she maximises subject to a constraint: C = w(1 – t) (hl) + π where w, h, l, C, t and π are wages, hours of time available, leisure, consumption, tax rate, and dividend income. The production function for this economy is given by Y = C +G=A(h − 1)¹/² Assume that h = 1, A = 1 and that the government has a balanced budget. (c) Either analytically or from your Laffer curve plot, find the value of t that maximizes tax revenue.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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