Lars consumes only potatoes and herring. When the price of potatoes was $9 per sack and the price of herring was $5 per crock, he spent his entire income to buy 5 sacks of potatoes and 10 crocks of herring per month. Now the government subsidizes potatoes. Market prices haven’t changed, but consumers get a subsidy of $5 for every sack of potatoes consumed. To pay for this subsidy, the government introduced an income tax. Lars pays an income tax of $20 per month. If s is the number of sacks of potatoes and c is the number of crocks of herring, what is Lars’s new budget constraint?

Lars consumes only potatoes and herring. When the price of potatoes was $9 per sack and the price of herring was $5 per crock, he spent his entire income to buy 5 sacks of potatoes and 10 crocks of herring per month. Now the government subsidizes potatoes. Market prices haven’t changed, but consumers get a subsidy of $5 for every sack of potatoes consumed. To pay for this subsidy, the government introduced an income tax. Lars pays an income tax of $20 per month. If s is the number of sacks of potatoes and c is the number of crocks of herring, what is Lars’s new budget constraint?

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter19: Elasticity

Section: Chapter Questions

Problem 4QP

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