Suppose that the state of "Intoxication" decides to impose an excise tax on liquor. Moreover, suppose for convenience that all types of liquor have the same price. Demonstrate geometrically (in an indifference curve diagram with bottles of liquor plotted along the x- or horizontal axis and "all other goods" (AOG) plotted along the y- or vertical axis) whether an individual consumer would be indifferent to an equal-revenue income tax. Or, would the consumer prefer to repeal the excise tax and substitute an equal-revenue income tax? In your indifference curve diagram (below), carefully label (i) the before-tax budget line, L1, (ii) the budget line following an excise tax, L2, and (iii) the equal-revenue income tax (in lieu of the excise tax), L3. Finally, please circle one of the following conclusions: (a) The consumer would prefer the excise tax (h). The consumer would prefer the equal-revenue income tax

Suppose that the state of "Intoxication" decides to impose an excise tax on liquor. Moreover, suppose for convenience that all types of liquor have the same price. Demonstrate geometrically (in an indifference curve diagram with bottles of liquor plotted along the x- or horizontal axis and "all other goods" (AOG) plotted along the y- or vertical axis) whether an individual consumer would be indifferent to an equal-revenue income tax. Or, would the consumer prefer to repeal the excise tax and substitute an equal-revenue income tax? In your indifference curve diagram (below), carefully label (i) the before-tax budget line, L1, (ii) the budget line following an excise tax, L2, and (iii) the equal-revenue income tax (in lieu of the excise tax), L3. Finally, please circle one of the following conclusions: (a) The consumer would prefer the excise tax (h). The consumer would prefer the equal-revenue income tax

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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