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Suppose there are two goods, labeled x, y with prices px = 2, py = 1.5, the budget on these two goods is w = 60.(a) Graph the consumer's budget line...

1. Suppose there are two goods, labeled x, y with prices px = 2, py = 1.5, the budget on these two goods is w = 60.(a) Graph the consumer’s budget line properly.(b) Suppose the government imposes a per-unit tax of 0.5 on good x for consumption of x that exceeds 20 units (namely for the first20 units of consumption on x, there’s no tax, consumers just pay px per unit, for each unit of good x consumed beyond the level20, the consumer pays px + 0.5 per unit). Draw the budget constraint in this case properly

This question was asked on Jul 20, 2016.

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