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Lea's utility function is U = ln( x ) + 0.8 y where x denotes her consumption of good X and y denotes her consumption
Lea's utility function is
U = ln( x ) + 0.8 y
where x denotes her consumption of good X and y denotes her consumption of good Y.
Suppose the government imposes a per-unit tax on good X equal to 9 dollars. The price of good X charged by the sellers of good X is Px = 11 (and does not change due to the tax), the price of good Y is Py = 5 and Lea's income is M = 329.
How much money must we give Lea to compensate her for the price increase due to the tax?
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