A consumer has preferences described by utility function u(x1,x2)=In(1+x1)+x2. Suppose p1=1, p2=3, and her income is 10. The government can tax good 1 at rate t, such that the price the consumer faces will become (1+t)p1. Find a tax rate t such that after the introduction of the tax the consumer decreases her consumption of good 1 by 50%.

A consumer has preferences described by utility function u(x1,x2)=In(1+x1)+x2. Suppose p1=1, p2=3, and her income is 10. The government can tax good 1 at rate t, such that the price the consumer faces will become (1+t)p1. Find a tax rate t such that after the introduction of the tax the consumer decreases her consumption of good 1 by 50%.

College Algebra (MindTap Course List)

12th Edition

ISBN:9781305652231

Author:R. David Gustafson, Jeff Hughes

Publisher:R. David Gustafson, Jeff Hughes

Chapter3: Functions

Section3.3: More On Functions; Piecewise-defined Functions

Problem 99E: Determine if the statemment is true or false. If the statement is false, then correct it and make it...

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