Question 3. Assume that there are two goods. The price of the first good is $10, the price of the second good is $5. The income is m=200. For the following read section 2.6. In all the cases below determine the equation of the new budget line, the intercepts, and the slope (always starting from the initial level of prices and income given above). · The government imposes a quantity tax of 2 Dollars on good 1; · The government imposes a value tax of 20% on good 1. · The government pays a quantity subsidy of 1 Dollar on good 1. · The government pays a lump sum subsidy of 40 Dollars.

Question 3. Assume that there are two goods. The price of the first good is $10, the price of the second good is $5. The income is m=200. For the following read section 2.6. In all the cases below determine the equation of the new budget line, the intercepts, and the slope (always starting from the initial level of prices and income given above). · The government imposes a quantity tax of 2 Dollars on good 1; · The government imposes a value tax of 20% on good 1. · The government pays a quantity subsidy of 1 Dollar on good 1. · The government pays a lump sum subsidy of 40 Dollars.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter6: Consumer Choices

Section: Chapter Questions

Problem 11RQ: As a general rule, is it safe to assume that a change in the price of a good will always have its...

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