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Tom is vegetarian and always eat a salad (s) with 2 glasses of green juice (g). His utility for the two goods is therefore

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

The government must increase its tax revenues to cover the higher federal deficit. It imposes
a sales tax of $5 on salad.

Tom is vegetarian and always eat a salad (s) with 2 glasses of green juice (g). His
utility for the two goods is therefore
1
u(s, g) = min{s, 79}

Tom's utility level after the introduction of the tax is
(a) 1
(b) 8
(c) 7
(d) 4
(e) 10

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