Show on graph and explain income and substitution effects considering that the government impose aproportional tax on income.

Q: Suppose that the government imposes a proportional income tax on the representative consumer’s wage…

A: Labor and Income: The majority of people earn the majority of their money by leasing their labour.…

Q: The indifferent curve of consumers have the usual shape with diminishing marginal rate of…

A: A lump sum tax is like a fixed cost which is not affected by the units of a good consumed and a per…

Q: The Marginal Rate of substitution depends on the   O a. Tastes and preferences of the consumer…

A: The  marginal rate of substitution depends on the taste and preference of the consumer because…

Q: Using a production possibility frontier, an arbitrary price line that does not equate supply and…

A: Production Possibility Frontier is the locus of points of production combination which an economy…

Q: Sarah’s weekly wage rate was reduced due to the company she works for cutting staff wage rates.…

A: To illustrate the scenario described involving Sarah's wage reduction and her decision to reduce her…

Q: Stuart's utility function for goods X and Y is represented as U(X,Y)=X0.8Y0.2. Assume that his…

A: we have Utility function=U(X,Y)=X0.8Y0.2     and Budget =$100=20x + 10y marginal utility of good…

Q: Second Fundamental Theorem of Welfare Economics a. Describe the theorem, making sure that you define…

A: Welfare economics is the study of finding optimal allocations of various resources that maximize the…

Q: The above graph shows the bundle of goods per day and free time per day in a country between 1900…

A: Income effect:-  It is the effect on consumption of goods and services according to the consumer…

Q: draw the budget constraint for a person with income of $ 1000 if the price of pepsi is $5 and the…

A: A budget constraint is a term used in economics to describe all of the different combinations of…

Q: Slutsky equation

A: The Slutsky equation is an essential idea in microeconomics that enables the analysis of the…

Q: Explain 2 ways a government could increase the consumption of merit goods

A: Merit goods are the goods whose consumption and production should be encouraged as these goods add…

Q: Any policy change that results in a Pareto - superior allocation A. will leave welfare unchanged. O…

A: Pareto superior allocation is a concept often used in welfare economics. As per this concept, the…

Q: In the figure below, which represents how the labor/leisure choice of a consumer changes when the…

A: In microeconomics, the income effect refers to the Δ in demand for a commodity or service caused by…

Q: Explain briefly the intuition behind the fundamental theorems of welfare..

A: The central issue welfare economics expects to address is deciding under what conditions individual…

Q: Consider a person who is endowed with 10 units of P and 10 units of G. If you observe the person not…

A: since this is a multipart question and according to our policy we can only solve the first 3 parts.…

Q: Second Welfare Theorems There are two goods A and B and two inputs K and L. The production functions…

A: First welfare theorem states that economy is in equilibrium in pareto optimal condition when perfect…