Consider a government that raises money in a two-good economy by taxing good 1 at a rate of t per unit. The government is considering replacing these taxes with a lump-sum tax to the consumer that raises the same revenue. Thus, if the consumer consumes x units of good 1 before the change in taxes, she must pay the government a lump sum of tx after the change. Suppose, moreover, that prices change only by the amount of the tax; i.e., if prices are (p₁+t, p2) before the change, then they become (P1, P2) after. Let x = (x₁, x2) be the consumer's demand before the change, and x' = (x₁, x2) the consumer's demand after. Suppose that x x'.

Consider a government that raises money in a two-good economy by taxing good 1 at a rate of t per unit. The government is considering replacing these taxes with a lump-sum tax to the consumer that raises the same revenue. Thus, if the consumer consumes x units of good 1 before the change in taxes, she must pay the government a lump sum of tx after the change. Suppose, moreover, that prices change only by the amount of the tax; i.e., if prices are (p₁+t, p2) before the change, then they become (P1, P2) after. Let x = (x₁, x2) be the consumer's demand before the change, and x' = (x₁, x2) the consumer's demand after. Suppose that x x'.

Principles of Economics, 7th Edition (MindTap Course List)

7th Edition

ISBN:9781285165875

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter6: Supply, Demand And Government Policies

Section: Chapter Questions

Problem 5QR

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. Consider a government that raises money in a two-good economy by taxing good 1 at a rate of t per unit. The government is considering replacing these taxes with a lump-sum tax to the consumer that raises the same revenue. Thus, if the consumer consumes x units of good 1 before the change in taxes, she must pay the government a lump sum of tx after the change. Suppose, moreover, that prices change only by the amount of the tax; i.e., if prices are (p₁ + t, p2) before the change, then they become (P₁, P2) after. Let x = (x1, x2) be the consumer's demand before the change, and x' (x1, x2) the consumer's demand after. Suppose that x = x'. = (a) Is one of x or x' revealed preferred to the other (and if so, which)? Solution: The budget constraint before the change is (p₁+t)ã₁+p2ã2 ≤w and after the change is p₁₁ +p2x2 ≤ w − tx₁. Since x = (x1, x2) satisfies the first budget constraint, it must also satisfy the second one. Hence x is affordable after the change when x' is chosen. Therefore,…
The U.S. income tax is currently O progressive O proportional O regressive O proactive a tax.
please only do: if you can teach explain steps of how to solve each part how was formula retrieve? Suppose that p1 = p2, w = 3p1, and x1 = 1. If the government removes the restrictionon consumption of good 1, the price of good 1 will rise from p1 to p01, and p2 and w willremain the same. For what values of p1 and p01 does the consumer prefer that the limitremain in place?
a) Solve for equilibrium output in terms of the exogenous variables. b) What is the multiplier? Is the multiplier higher whent1is 0 or whent1is positive? Note)t1= 0is the same as the baseline case we covered in class when taxes are exogenous. c) Supposec0increases by $300 m. What is the change in equilibrium Y when c1= 0.5 and t1= 0.2. What about whenc1= 0.5 and t1= 0?
Suppose that the U.S. government decides to charge wine consumers a tax. Before the tax, 35 billion bottles of wine were sold every year at a price of $5 per bottle. After the tax, 28 billion bottles of wine are sold every year; consumers pay $6 per bottle (including the tax), and producers receive $3 per bottle. The amount of the tax on a bottle of wine is S burden that falls on producers is S |per bottle. Of this amount, the burden that falls on consumers is S per bottle, and the per bottle. True or False: The effect of the tax on the quantity sold would have been smaller if the tax had been levied on producers. True O False
Imagine there is a tax on cigarettes and that consumers and producers each bear some portion of the tax. Assume that when vape pens were introduced, they were not taxed. How would you expect that introduction of vape pens to affect the distribution of the tax burden associated with the cigarette tax? O It will decrease the consumer tax burden because demand for cigarettes will become more elastic. O It will increase the consumer tax burden because demand for cigarettes will become more elastic. O It will decrease the consumer tax burden because demand for cigarettes will become more inelastic. O It will increase the consumer tax burden because demand for cigarettes will become more inelastic.
Identify whether each of the following taxes is progressive or regressive and indicate in each case where you think the tax incidence lies. d. The federal personal income tax is O proportional, and the incident is on the taxpayer. O average, and the incident is on the consumer. O progressive, and the incident is on the taxpayer. O regressive, and the incident is on the taxpayer. e. A 4 percent state general sales tax is O proportional, and the incident is on the consumer. O regressive, and the incident is on the consumer. O average, and the incident is on the consumer. O progressive, and the incident is on the taxpayer. f. A federal excise tax on automobile tires is O progressive, and the incident is on the taxpayer. O proportional, and the incident is on the consumer. O regressive, and the incident is on the consumer. O average, and the incident is on the consumer.
When the price is 10 TL for each pack of cookies, the supply is 250 thousand and the demand is 120 thousand boxes. When the price is 9,5 TL for each pack of cookies, the supply is 200 thousand and the demand is 240 thousand boxes. Since the price-demand and supply-demand equations are linear; Calculate the producer and consumer annuity and find and interpret the market equilibrium point after-tax if the consumer is taxed at a rate of 0,75 TL per product.
Question 20 Assume that for good X the supply curve for a good is a typical, upward-sloping straight line, and the demand curve is a typical downward-sloping straight line. If the good is taxed, and the tax is tripled, the O base of the triangle that represents the deadweight loss triples. O height of the triangle that represents the deadweight loss triples. O All of the above are correct. O deadweight loss of the tax increases by a factor of nine.
Economics Below is a tax table. Assume I earn $150 a year. My tax bracket is my marginal tax rate is I pay in taxes. my average tax rate is ; and O to $100 is 10% $101 to $200 is 15% $201 to $300 is 20% O 10%; 15%; 13.5%; $17.50 O 15%; 15%; 11.7%; $17.50 O none of these O 15%; 15%; 12.5%; $13.50
Suppose that after an excise tax was imposed on sofas, the price buyers paid for sofas increased by $5. Suppose further that the price elasticity of demand for sofas is 1.8 and the price elasticity of supply for them is 1.6. It can be concluded with certainty that the amount of the excise tax was Select one: OA less than $5. B. $5. OC. greater than $5 but less than $10. OD. $10. OE. greater than $10.
Assume the following behavioral equations for a macroeconomy: C = 100 + .9Yd, l = 50, T= $100 and G = $40 from the above behavioral equation tax multiplier is Select one: O a. 1 b. none of the options O c. 10 O d. 9