The demand for X is given by X = 100-2P, and its supply is perfectly elastic at P,= 14. The demand for Y is given by Y = 3500-3Py, and its supply is perfectly elastic at Py 18. Suppose that the government must raise R = $1,000 using a consumption tax on X and Y. 1. The elasticity of demand for X at market equilibrium is &x = 2. The elasticity of demand for Y at market equilibrium is ɛ, D 3. A Ramsey optimal tax of t, on X and t, on Y, would have a tax ratio of t/t,= 4. Given that the government must raise R $1,000, the optimal tax rate for X is t = and the optimal tax rate for Y is tx=

The demand for X is given by X = 100-2P, and its supply is perfectly elastic at P,= 14. The demand for Y is given by Y = 3500-3Py, and its supply is perfectly elastic at Py 18. Suppose that the government must raise R = $1,000 using a consumption tax on X and Y. 1. The elasticity of demand for X at market equilibrium is &x = 2. The elasticity of demand for Y at market equilibrium is ɛ, D 3. A Ramsey optimal tax of t, on X and t, on Y, would have a tax ratio of t/t,= 4. Given that the government must raise R $1,000, the optimal tax rate for X is t = and the optimal tax rate for Y is tx=

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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