Consider a Consumer That Only Purchases Two Goods,X and Y

question 46

Essay

Consider a consumer that only purchases two goods,X and Y.The government wishes to collect revenue from taxing this consumer and is considering two policies.The first policy is to only tax good X.The second policy will tax both goods by the same percentage.Assume that the tax rates in each policy are selected such that they collect the same amount of revenue.Which policy will have a smaller reduction in the consumer's well-being? (Use a graph of indifference curves and budget constraints to illustrate your answer)

---

Definitions:

Visual Acuity

The clarity or sharpness of vision, usually measured as the ability to discern letters or numbers at a specified distance according to a standardized chart or test.

Newborn

An infant who is within hours, days, or up to a few weeks old, particularly during the initial period immediately after birth.

20/600

A measure of visual acuity indicating that the smallest letter a person can read from a distance of 20 feet is normally visible at 600 feet.

Hearing

The sense and physiological process that enables sound perception through the detection of vibrations and their interpretation by the brain.