Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Ben allocates his lunch budget between two goods, pizza and burritos. The gure to the right illustrates Ben's original budget line. Suppose that pizza is

image text in transcribed
Ben allocates his lunch budget between two goods, pizza and burritos. The gure to the right illustrates Ben's original budget line. Suppose that pizza is taxed, causing the price to increase (by 20 percent, for example). Then suppose instead that pizza is rationed at a quantity less than Ben's desired quantity. Show how these changes affect Ben's optimal bundle using an indifference map. 1.) Using the three-point Gun/ed line drawing tool, draw an indifference curve. Label this curve U1 . 2.) Using the pom! drawmg tool, show an equilibrium consumption bundle that illustrates Ben maximizing satisfaction before the pizza tax. Label this point e1. 3.) Using the line drawing tool, graph Ben's new budget line with the pizza tax. Label this line LT. 4.) Using the three-point Gun/ed line drawing tool, add a new indifference curve. Label this curve UT. 5.) Using the point drawtng tool, show an equillibrium consumption bundle that illustrates Ben maximizing satisfaction with the tax on pizza. Label this point eT. 6.) Using the point drawing tool, show Ben's satisfaction-maximizing bundle when pizzas are rationed at some quantity that is less than Ben's desired quantity of pizza. (Assume there is no pizza tax) Label this point eR. Carefully follow the instructions above, and only draw the required objects. Pizza Burritos ,oa

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Development Economics In The Twenty-First Century

Authors: Claudia Sunna, Davide Gualerzi

1st Edition

1317219961, 9781317219965

More Books

Students also viewed these Economics questions

Question

Define Management by exception

Answered: 1 week ago

Question

Explain the importance of staffing in business organisations

Answered: 1 week ago

Question

What are the types of forms of communication ?

Answered: 1 week ago