Mike consumes 20 beers every month. The price of a beer is $1. The government imposes an excise tax of $0.20 per beer and gives Mike an income tax…
Mike consumes 20 beers every month. The price of a beer is $1. The government imposes an excise tax of $0.20 per beer and gives Mike an income tax credit of $4/month. Mike’s income is $I (choose any number over 30). Draw Mike’s budget lines before and after the excise tax and tax credit scheme. (Put AOG on the vertical axis and beer on the horizontal axis.)
AOG 20/PAOG BEER20 The number of beer is fixed and is equal to 20 regardless of income. Now if we take income to be $40.Before tax and credit, price of beer was $1 thus he will use $2o for beer….
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