HWIV.F08 - HOMEWORK ECONOMICS 200A IV. TOPICS IN DEMAND...

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HOMEWORK ECONOMICS 200A IV. TOPICS IN DEMAND THEORY R. R. RUSSELL FALL 2008 1. Do the two assignments on page 41 of the overhead handouts, mathematically if you have the time and inclination, graphically if you don’t. 2. In leisure/income space, (a) identify the after-tax budget constraint for a worker facing (i) a lump-sum tax, (ii) a proportional income tax, and (iii) a progressive income tax; (b) show that the worker is better off paying a lump-sum tax than an equivalent amount of proportional income taxes; and (c) show that the consumer/worker can always be induced to work longer hours by means of an overtime pay structure than by any straight-time wage rate. 3. Consider an indifference map in x i - m space where the indifference curves intersect the m axis. Illustrate an (interior) optimal consumption bundle, h * x i , * m i , given a price, p i , and indicate (a) the maximal (lump sum) amount of money that the consumer would be willing to pay in order to retain the right to purchase (any amount of) the
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