# hw3 - Homework Assignment 3 Econ 121b Intermediate...

This preview shows pages 1–2. Sign up to view the full content.

Homework Assignment # 3 Econ 121b. Intermediate Microeconomics due February 2, 2011 (in class) Please put your discussion-section time and TA’s name on your answer. 1. Suppose the consumer’s utility function is given by u.x 1 ;x 2 / D x 1 x 2 2 . As usual, his budget constraint is p 1 x 1 C p 2 x 2 D m . To be concrete, suppose p 1 D p 2 D 10 and m D 90 . (a) Suppose the government places a 50 % ad valorem tax on good 1. Write the new budget constraint, given the tax. Identify the utility maximizing bundle x 1 and x 2 for the consumer, the amount of tax revenue collected by the government, and calculate the consumer’s utility at the optimum. (b) Now suppose instead the government places a 20 % ad valorem tax on good 2. Write the new budget constraint, given the tax. Identify the utility maximizing bundle x 1 and x 2 for the consumer, the amount of tax revenue collected by the government, and calculate the consumer’s utility at the optimum.

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

## This note was uploaded on 03/01/2012 for the course ECON 121 taught by Professor Samuelson during the Spring '09 term at Yale.

### Page1 / 2

hw3 - Homework Assignment 3 Econ 121b Intermediate...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online