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Derive an efficient commodity taxation rule (Ramsey taxation rule) (b) Now assume that there are two (unrelated) commodities x and y whose compensated price elasticities
Derive an efficient commodity taxation rule (Ramsey taxation rule) (b) Now assume that there are two (unrelated) commodities x and y whose compensated price elasticities are Suppose we know that , what should be the tax rate on commodity y? (c) In addition to above information we know that before tax consumption of commodity y is 10 units at a pre-tax price $60. What is the excess burden associated with a commodity tax on y?
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