Brian has income of $3200. He spends it on fruits(x) and vegetables (y). The price of fruits is $100 per kilo, and the price of vegetables is $70 per kilo. Assume u(x,y) = 2x^1/2 +4y^1/2 The government want to impose a tax to minimize consumption of vegetables. A tax of $10 per kilo of vegetables is applied if consumption exceeds 5 kilos of vegetables. Plot Brian's budget line with and without the tax and interpret.

Brian has income of $3200. He spends it on fruits(x) and vegetables (y). The price of fruits is $100 per kilo, and the price of vegetables is $70 per kilo. Assume u(x,y) = 2x^1/2 +4y^1/2 The government want to impose a tax to minimize consumption of vegetables. A tax of $10 per kilo of vegetables is applied if consumption exceeds 5 kilos of vegetables. Plot Brian's budget line with and without the tax and interpret.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter7: Market Efficiency And Welfare

Section: Chapter Questions

Problem 2P

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