Suppose the Government Levies a Per-Unit Tax on TVs, and This

question 5

Essay

Suppose the government levies a per-unit tax on TVs, and this tax increases the price of TVs by $100.Model TVs as x₁ and all other goods as a composite good x₂.
a.For a consumer with income I, write down an equation for the before-tax budget line.
b.Write down the after-tax budget line equation.
c.Suppose you know the bundle on the after-tax budget that is chosen by the consumer contains 3 TVs.How much in tax revenue is the government raising from this consumer?
d.If the government replaced the tax on TVs with a lump sum tax that does not alter any prices but raises the same amount of revenue from the consumer, how would this change the consumer's budget line equation?

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Definitions:

Paralinguistics

Aspects of spoken communication that do not involve words themselves but how they are spoken, including tone, loudness, and pitch.

Occulesics

A subdivision of nonverbal communication that focuses on the study of eye behavior, including patterns of eye contact, gazing, blinking, and movements, and their interpretation.

Linguistics

The scientific study of language and its structure, including phonetics, syntax, and semantics.

Kinesics

The study of body movements, gestures, and facial expressions as a form of non-verbal communication.