Answer to Question #45907 in Microeconomics for Behailu

Question

Suppose that government has imposed 50% excise tax on cigarette. If the per unit price is 1 birr and the income of the consumer is birr 12.
A, show how this tax policy affects the position of budget line.
B, Determine the amount of cigarette consumed before the imposition of tax and after the imposition of tax
C, explain the effect of the tax on the purchasing power of this typical consumer