The aim of this question is to derive the sufficient statiscs formula for the efficiency cost of a tax. Broadly, the aim of sufficient statistics in public economics is to express the welfare effects of a policy as a function of parameters, we can estimate using quasi-experimental est imation methods. Take the same statist general equilibrium model that we discussed in class to measure the excess burden of a tax using sufficient statistics. (a) Derive the first-order conditions of the individual maximization problem. (b) Derive the first-order conditions of the firm optimization problem. (c) Derive the sufficient statistic for the efficiency cost of tax changes using the first-order

The aim of this question is to derive the sufficient statiscs formula for the efficiency cost of a tax. Broadly, the aim of sufficient statistics in public economics is to express the welfare effects of a policy as a function of parameters, we can estimate using quasi-experimental est imation methods. Take the same statist general equilibrium model that we discussed in class to measure the excess burden of a tax using sufficient statistics. (a) Derive the first-order conditions of the individual maximization problem. (b) Derive the first-order conditions of the firm optimization problem. (c) Derive the sufficient statistic for the efficiency cost of tax changes using the first-order

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter12: The Partial Equilibrium Competitive Model

Section: Chapter Questions

Problem 12.10P

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In the United States, one of the largest welfare programs is the Supplemental NutritionAssistance Program (SNAP)1representing the second largest in-kind transfer programfor individuals in the US. From the abstract of the study we are told “[a] 1% increasein benefits per population raises grocery prices by a persistent 0.08%. A calibratedpartial-equilibrium model implies a marginal benefit dollar raises a recipient’s consumersurplus from groceries by $0.7, producer surplus by $0.5, and lowers each non-SNAPconsumer’s surplus by $0.05.” In other words, increasing the size of the in-kind transferleads to higher prices. This higher price results in a larger surplus for grocery stores anda lower consumer surplus for individuals not participating in SNAP. Those individualswho participate in SNAP can increase their overall consumer surplus as they haveaccess to more goods, despite the higher price. This result is estimated using thenearly 100% redemption of the SNAP benefits (i.e. assuming the…
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The equation of demand is Q=10000-5p, supply is Q=-2000+10p Q represents the quantity of houses on the market and P the rental price. The equilibriumrental price equals 800 euros per month. if the government imposing a maximum price of 500 euro per month,What are the effects of each measure for both house owners and people renting ahouse? And what are the consequences for the government? Analyse the measuresgraphically and mathematically.
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