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I'm a bit confused with the min{ax1,ax2}Intermediate microeconomics Non-Standard Preferences 40 pts] Assume the preferences of the representative consumer over the two country goods are

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I'm a bit confused with the min{ax1,ax2}Intermediate microeconomics

image text in transcribed
Non-Standard Preferences 40 pts] Assume the preferences of the representative consumer over the two country goods are such that he is willing to consume 2 units of good 1 together with 3 units of good 2. Assume the consumer's preferences can be represented by the utility function u(11, 22) - min far, br2}, where a and b are parameters. The prices of the two goods are p1 - p2 = 1. The consumer has an income m = 1008. 1. Give the parameters a and b. [10pts]. 2. Compute the optimal consumption bundle and the utility level. [10pts]. 3. Now assume the government imposes a tax. For each unit of good 1 consumed, the consumer is required to pay 0.3 to the government. What is the consumer's optimal bundle and utility level with this tax. [05pts]. 4. What is the government income generated by this tax policy. [05pts]. 5. Now assume the government wants to get the income from Question 3 by imposing a lump- sum income tax. Derive the consumer's optimal bundle with this new tax policy. [05pts]. 6. Which tax policy appears to be the best for the consumer. [05pts]

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