Part I. Consider two goods X and Y, which are neither substitutes nor complements each other....
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Part I. Consider two goods X and Y, which are neither substitutes nor complements each other. The two good's compensated elasticities of demand are -1 and -2, respectively. Denote tx and ty as the ad valorem commodity tax rates on X and Y. 1. What does the principle of optimal taxation say about the ratio of X's ad valorem commodity tax rate to Y's (=tx/ty)? 2. If we set tx and ty following the rule in Q1, how much would be the relative percentage change in the compensated demands for X and Y (=)? Now suppose there are three taxpayers, A, B, and C. The government imposes tax on X and Y at the rates tx and ty, as determined above. (in million wons) Income per year Consumption of X (after-tax quantity) Consumption of Y (after-tax quantity) A 50 0.1 0.2 B 50 0.2 0.1 C 100 0.2 0.2 3. Does the tax satisfy the principle of horizontal equity? 4. Does the tax satisfy the principle of vertical equity? 5. If the government imposes a lump-sum tax instead of the optimal commodity tax, how would the excess burden change? Part I. Consider two goods X and Y, which are neither substitutes nor complements each other. The two good's compensated elasticities of demand are -1 and -2, respectively. Denote tx and ty as the ad valorem commodity tax rates on X and Y. 1. What does the principle of optimal taxation say about the ratio of X's ad valorem commodity tax rate to Y's (=tx/ty)? 2. If we set tx and ty following the rule in Q1, how much would be the relative percentage change in the compensated demands for X and Y (=)? Now suppose there are three taxpayers, A, B, and C. The government imposes tax on X and Y at the rates tx and ty, as determined above. (in million wons) Income per year Consumption of X (after-tax quantity) Consumption of Y (after-tax quantity) A 50 0.1 0.2 B 50 0.2 0.1 C 100 0.2 0.2 3. Does the tax satisfy the principle of horizontal equity? 4. Does the tax satisfy the principle of vertical equity? 5. If the government imposes a lump-sum tax instead of the optimal commodity tax, how would the excess burden change?
Expert Answer:
Answer rating: 100% (QA)
1 The advelorem tax of any commodity is levied as a percentage of the market value of the com... View the full answer
Related Book For
Posted Date:
Students also viewed these finance questions
-
Assume you are assigned the job of facilitating the end of an identity-based conflict between two people. Post how would you break through the identity issues to get the parties to talk with each...
-
QUIZ... Let D be a poset and let f : D D be a monotone function. (i) Give the definition of the least pre-fixed point, fix (f), of f. Show that fix (f) is a fixed point of f. [5 marks] (ii) Show that...
-
For monotone functions f, f0: P Q between posets (P, vP ) and (Q, vQ), let f v f(i) Prove that the binary relation v is a partial order. [3 marks] (ii) For monotone functions between posets p : P 0...
-
The article Mutational Landscape Determines Sensitivity to PD-1 Blockade in Non-Small Cell Lung Cancer (Science, 3 April 2015) described a study of 16 cancer patients taking the drug Keytruda. For...
-
Refer to the revenue arrangement in E18.10. Instructions Repeat the requirements, assuming (a) Geraths estimates the standalone selling price of the installation based on an estimated cost of $400...
-
The ratio of carbon-14 to carbon-12 in a piece of wood discovered in a cave is R = 1/814. Estimate the age of the piece of wood.
-
Identify organizations in your area that fit each business market category: producer, reseller, government, and institutional. Explain your classifications.
-
Distinguish between the explicit context of social work and the implicit context of social work; additionally, identify specific task and functions social workers, paralegals and lawyers perform...
-
An amount of $ 350 , 000 is borrowed for a period of 30 years at an interest rate of 5.5 % . The amortization schedule for this loan is below. Payments of $ 1 , 987.26 are made monthly. Payment #...
-
Presented below is the trial balance of Scott Butler Corporation at December 31, 2014. Instructions Prepare a balance sheet at December 31, 2014, for Scott Butler Corporation. (Ignore incometaxes.)...
-
As a leader, it is imperative that you know where your organization is positioned regarding its various external environments. Leaders must recognize and analyze potential risks, as well develop a...
-
During 2 0 2 3 , Vasu wants to take advantage of the annual exclusion and make gifts to his 9 married children ( plus their spouses ) and his 2 2 minor grandchildren. a . How much property can Vasu...
-
Sierra Stone Ltd. received an invoice dated January 16 with terms 2/15, n/30. The amount stated on the invoice was $2702.00. (a) What is the last day for taking the cash discount? (b) What is the...
-
How does the SWIFT network ensure the secure and efficient transmission of financial messages across global financial institutions, and what encryption and authentication protocols does it employ to...
-
Many of your readings for this module discuss the concept of "public health" and "public health emergencies," including the role of the state in public health. Using Jacobson and including at least...
-
Presented below is information for Blue Spruce Corp. for the month of January 2 0 2 2 . Cost of goods sold $ 2 3 1 , 0 4 4 Rent expense $ 3 0 , 0 0 0 Freight - out 7 . 0 0 0 Sales discounts 8 . 0 0 0...
-
Performance Criteria 2.1 Provide information to relevant professional/s about the person with disability in relation to their likes/dislikes, daily activities and current communication needs 2.2...
-
If |62x|>9, which of the following is a possible value of x? A. 2 B. 1 C. 0 D. 4 E. 7
-
a. Lets explore the difference between the average income tax rate and the marginal income tax rate. In the simple land of Rabushka, there is only one tax rate, 20%, but workers dont have to pay tax...
-
President Jimmy Carter didnt just deregulate airline prices. He also deregulated much of the trucking industry as well. Trucks carry almost all of the consumer goods that you purchase, so almost...
-
In the short run the price elasticity of the demand and supply of electricity can be very low. a. How might revenue for the electricity industry change if one power plant were shut down for...
-
A company often test-markets a proposed product in a specific area or location. Suppose that you wish to test-market your new, revolutionary SuperWax car wax, which requires only one application for...
-
The idea for New Belgium Brewing Company began with a bicycling trip through Belgium, where some of the worlds finest ales have been brewed for centuries. As Jeff Lebesch, a U.S. electrical engineer,...
-
It is helpful to think of a total product offering as having a combination of three interdependent elements: the core product itself, its supplemental features, and its symbolic or experiential...
Study smarter with the SolutionInn App