Plot and label 3 indifference curves for each of three consumers, using a different graph for each consumer: U(x1,X2) = X,X2 is consumer 1 so draw three curves for them U(x1,X2) = min(x,/5, 2x,+3) is consumer 2, so 3 curves for them U(x1,X2) = 3x, + 4x, is consumer 3, so 3 curves for them too On each consumer's graph, plot and label the budget constraint that uses Y = 100, px1 = $4, px2 = $5 > Now assume that there is a tax of $1 per unit of x1, to be refunded as payment of $10 per person. Plot that new post-tax budget constraint on each consumer's graph. > As best you can, find consumer equilibrium for each consumer in the pre-tax and post-tax situations (6 solutions in all) > What is the value of MRS at each of the 6 equilibria?

Plot and label 3 indifference curves for each of three consumers, using a different graph for each consumer: U(x1,X2) = X,X2 is consumer 1 so draw three curves for them U(x1,X2) = min(x,/5, 2x,+3) is consumer 2, so 3 curves for them U(x1,X2) = 3x, + 4x, is consumer 3, so 3 curves for them too On each consumer's graph, plot and label the budget constraint that uses Y = 100, px1 = $4, px2 = $5 > Now assume that there is a tax of $1 per unit of x1, to be refunded as payment of $10 per person. Plot that new post-tax budget constraint on each consumer's graph. > As best you can, find consumer equilibrium for each consumer in the pre-tax and post-tax situations (6 solutions in all) > What is the value of MRS at each of the 6 equilibria?

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter6: Consumer Choice Theory

Section6.A: Indifference Curve Analysis

Problem 11SQ

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