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Anna has a total income of $600 which she spends on stationery and books. The price of books is $30 while stationary is half times
Anna has a total income of $600 which she spends on stationery and books. The price of books is $30 while stationary is half times as expensive. a. Using indifference curves and budget line analysis, graphically show the optimal point of consumption. The MRS food, stationary is 2 b. The government imposes a tax on stationery of $5 per unit. Show how that will change the analysis. c. Graphically show, how much is the tax revenue, equivalent variation, and the deadweight loss. d. Explain how the Pareto efficiency condition will be compromised.
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