The analysis of taxation in the single-consumer economy used labor as an untaxed numeraire. Show that the optimal allocation with commodity taxation is unchanged when the consumption good becomes the untaxed nume´raire. Then establish that it does not matter which good is nume´raire and which is taxed.

Microeconomics: Private and Public Choice (MindTap Course List)
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ISBN:9781305506893
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter4: Demand And Supply: Applications And Extensions
Section: Chapter Questions
Problem 13CQ
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The analysis of taxation in the single-consumer economy used labor as an untaxed numeraire. Show that the optimal allocation with commodity taxation is unchanged when the consumption good becomes the untaxed nume´raire. Then establish that it does not matter which good is nume´raire and which is taxed.

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