(a)You are a consultant to the government of Zimbabwe. The government has decided to cut taxes on either apples, bananas, or Yogurt, and it wants your input on which good would be the best choice for a tax cut. It provides you with the following information. What is your recommendation, and why?

good unit price sales unit tax Marginal tax revenue Marginal dead weight loss

Apple 1 100 0.10 20 5

Banana 2 100 0.25 30 20

Yogurt 4 50 0.15 10 20

(b) Discuss why governments will tax Luxury goods despite having a much higher elasticities of demand.

(c) Discuss the Haig-Simons and Musgrave view of an idea tax base and state the equity implications of each view?