Assume that the consumer’s income is $133,000, the price of X is 21, the price of Y is 29, , and . Furthermore, assuming that the government imposes a tax of $10 on good X, calculate and explain the CV, the EV, and the excess burden. 32 Points→Use Graphs
Assume that an individual has an income of $325,000 which is spent entirely on the consumption of good X and good Y, and the price of X is $27 and the price of Y is $15. Utilizing the given equations answer the following questions. (100 Points)
Calculate and graph the consumer’s optimal bundle and utility.
Assuming that the government imposes a subsidy of $13 per unit on X, calculate and graph the consumer’s new optimal bundle.
Using indifference curves and the compensated demand functions calculate the CV, EV, & excess burden of the subsidy.
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