Answer to Question #222897 in Microeconomics for Ariel

Question

Consider a consumer who is choosing how many of two goods to buy: Footballs and cricket balls. The consumer has an income of $20, and the cost of a football is $4 and a cricket ball is $2. (a) Write down the equation for the consumer’s budget constraint and graph it.(b) The government decides that football is evil and needs to be taxed. They introduce a 50% tax on each football sold. Rewrite and re-graph the budget constraint.(c) A new government is elected that hates all sports. They now tax both footballs and cricket balls at 50%. What does the budget constraint look like now?

Answer 1

(a) $20= 4P_f+2P_c$

(b) $20=6P_f+2P_c$

(c)$20=6P_f+3P_c$