Suppose that there are two commodities in the marketplace (X an Y ) and they are (5) completely unrelated in consumption. (They are neither…
Suppose that there are two commodities in the marketplace (X an Y ) and they are (5) completely unrelated in consumption. (They are neither compliments or substitutes.) The compensated demand elasticity for X is ηx = −0.6 and the compensated elasticity for Y is ηy = −0.4. If a 15% sales tax is applied to good X, according to the Ramsay Tax Rule, how much should the tax on Y be?
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