Consider a Worker Who Consumes a Composite Consumption Good (On

question 11

Essay

Consider a worker who consumes a composite consumption good (on the vertical axis) and leisure hours (on the horizontal axis).
a.Suppose the worker has 80 hours of leisure per week and can earn a wage of $50 per hour.Illustrate the worker's weekly budget constraint.
b.In order to close the deficit, the government introduces a broad-based consumption tax on all consumer goods -- raising the price of the consumption good by 20%.Illustrate the new budget constraint faced by our worker.
c.On your graph, indicate the level of tax revenue raised by this broad-based consumption tax.
d.Using your graph, discuss why this tax is inefficient.
e.In this model is there any difference between the consumption tax and a wage tax? What is different about the real world that would change your conclusion about this?

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Definitions:

Gaming Console Sales

The total revenue or number of units sold from video game consoles, a key indicator of the gaming industry's performance and consumer preferences.

Mean Square Error

It measures the average of the squares of the errors that is, the average squared difference between the estimated values and the actual value.

Sales Details

Specific information related to the quantity, price, and conditions of the sales transactions.

Game Sales

The volume of video game units sold or revenues generated from selling video games in a specified period.