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Q1) The standard budget constraint may be written as p1x1 + p2x2 = Y
where Y is income, p1 and p2 are the prices of goods x1 and x2 respectively. x1 and x2 are the quantity of goods consumed. For each of the below scenarios, mathematically define the modified budget constraint. Then for each case, graph the original and modified budget constraint on a single graph.

(a) The government subsidies good x2 by s dollars.

(b) The government issues a 10% tax on both goods.

(c) The government issues a onetime stimulus payment of $600.

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M922680

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