Utility maximization

1. Because of a change in your diet, you now strongly preferred oranges to apples. How does this change your indifference curve? Explain.
2. Because of a change in your diet, you now strongly preferred oranges to apples. Faced with the same budget set, how does your optimal bundle change? Explain.
3. Recall the apples and oranges example for utility maximization. If now apples are taxed while there is no tax on oranges. How does the tax change the budget line?
4. Recall the apples and oranges example for utility maximization. Now your income increases by 30% because of a bonus, how does this bonus change your budge line?
5. Explain what is the marginal rate of substitution in a one-period two-good model.
6. If you are a policymaker to design a tax scheme. Which is better, a commodity tax or an income tax? Explain how your choice will affect the budget line and the optimal bundle. Explain why it is better than the other choice.