(Solution) If The Government Imposes A Quantity Tax On The Consumption Of A Good, It Means That The Consumer Has To Pay For Each Unit Of The Good Its Price Plus... | Snapessays.com

(Solution) If the government imposes a quantity tax on the consumption of a good, it means that the consumer has to pay for each unit of the good its price plus...

If the government imposes a quantity tax on the consumption of a good, it means that the consumer has to pay for each unit of the good its price plus the tax. For example, if the price of a chocolate bar is \$5 and the government imposes a tax of 20 cents on the consumption of a chocolate bar, then the actual price the consumer pays for a chocolate bar is \$5 + \$0.2 = \$5.20.Suppose there are two goods available for consumption, good 1 and good 2, and that the government taxes consumption of good 2 that is in excess of quantity x ?2 (that is, consumption of good 2 up to quantity x ?2 is exempt of tax). Denote by t the amount of dollars a consumer has to pay for every unity she consumes in excess of x ?2.Draw the budget set of a consumer with income m. Is the slope of the budget line constant?

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This question was answered on: May 23, 2022

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