Suppose that a budget equation is given by p1x1 + p2x2 = m. The government decides to impose a lump-sum tax of u, a quantity tax on good 1 of t, and a quantity subsidy on good 2 of s. What is the formula for the new budget line?
Suppose that a budget equation is given by p1x1 + p2x2 = m. The government decides to impose a lump-sum tax of u, a quantity tax on good 1 of t, and a quantity subsidy on good 2 of s. What is the formula for the new budget line?
Chapter5: Supply, Demand, And Price: Applications
Section5.2: Application 2: Subsidizing The Consumption Of Anything Can Raise Its Price
Problem 1ST
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Suppose that a budget equation is given by p1x1 + p2x2 = m. The government decides to impose a lump-sum tax of u, a quantity tax on good 1 of t, and a quantity subsidy on good 2 of s. What is the formula for the new budget line?
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