4 1(a) If u=min(3x,y) and I=250 and py=5, what are the income and substitution effectsof an decrease in the price of x from $8 to $6? Show your work.(b) for the utility function u=2x+y1/2, for l=250 and initial prices py=6 and py=5, showthat a sales tax of $2 per unit of x is worse in terms of utility than the equivalentincome tax (i.e. the income tax where the individual pays the same amount of tax asthe sales tax case).

given:- u=min(3x,y) I=250 Px(old)=8 Px(new)=6…

1(a) If u=min(3x,y) and I=250 and py=5, what are the income and substitution effects of an decrease in the price of x from $8 to $6? Show your work. (b) for the utility function u=2x+y1/2, for l=250 and initial prices px=6 and py-5, show that a sales tax of $2 per unit of x is worse in terms of utility than the equivalent income tax (i.e. the income tax where the individual pays the same amount of tax as the sales tax case).

1(a) If u=min(3x,y) and I=250 and py=5, what are the income and substitution effects of an decrease in the price of x from $8 to $6? Show your work. (b) for the utility function u=2x+y1/2, for l=250 and initial prices px=6 and py-5, show that a sales tax of $2 per unit of x is worse in terms of utility than the equivalent income tax (i.e. the income tax where the individual pays the same amount of tax as the sales tax case).

Microeconomics A Contemporary Intro

10th Edition

ISBN:9781285635101

Author:MCEACHERN

Publisher:MCEACHERN

Chapter6: Consumer Choice And Demand

Section: Chapter Questions

Problem 15PAE

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