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Carlotta's income is 100$. Initially, the price of movies, pm, is 2 dollars and the price of sodas, py, is 0.5 dollars. Governor Newsom decides
Carlotta's income is 100$. Initially, the price of movies, pm, is 2 dollars and the price of sodas, py, is 0.5 dollars. Governor Newsom decides to impose a sales tax on sodas for public health reasons that quadruples its price (p'y = 2). The introduction of the sales tax on sodas changes Carlotta's utility by (the number is rounded to the second decimal place; the question asks about the change in utility) o -1.39 o -O.46 O -2.73 o -1.73 O -0.72 Question 17 5 pts Newsom is Carlotta's friend. After talking to her, he realizes that her welfare has declined signicantly because of the the sales tax on soda. He therefore decides to provide her with a lump sum subsidy that moves Carlotta to her utility level before the introduction of the soda. Newson needs you help finding this subsidy. After a few calculations you tell him that the subsidy should be equal to: 075 O 200 O 100 O 150 050
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