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Suppose that pizza is taxed, causing the price to increase (by 20 percent, for example). Then suppose instead that pizza is rationed at a quantity
Suppose that pizza is taxed, causing the price to increase (by 20 percent, for example). Then suppose instead that pizza is rationed at a quantity less than Ben's desired quantity. Show how these changes affect Ben's optimal bundle using an indifference map. 1.) Using the three-point curved line drawing tool, draw an indifference curve. Label this curve U1. 2.) Using the point drawing tool, show an equilibrium consumption bundle that illustrates Ben maximizing satisfaction before the pizza tax. Label this point e1. 3.) Using the line drawing tool, graph Ben's new budget line with the pizza tax. Label this line LT. 4.) Using the three-point curved line drawing tool, add a new indifference curve. Label this curve UT. 5.) Using the point drawing tool, show an equillibrium consumption bundle that illustrates Ben maximizing satisfaction with the tax on pizza. Label this point eT. 6.) Using the point drawing tool, show Ben's satisfaction-maximizing bundle when pizzas are rationed at some quantity that is less than Ben's desired quantity of pizza. (Assume there is no
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