Suppose that the government feels sad for athletes and decides to subsidize retired athletes when they’re old. This can’t be free! In order to pay athletes the subsidy G in period 2, the government taxes everyone the amount T in period 1. Note that you pay this whether you go pro or not. Furthermore, the government balances its budget such that G=T. 8. Derive the new intertemporal budget constraints for the pro and non-pro cases in terms of r, C, Y, S, and T. 9. Briefly and intuitively, are you more or less likely to go pro under this government policy, and why? If you are an athlete, how much of your tax T will the government eventually ‘return’ to you

Suppose that the government feels sad for athletes and decides to subsidize retired athletes when they’re old. This can’t be free! In order to pay athletes the subsidy G in period 2, the government taxes everyone the amount T in period 1. Note that you pay this whether you go pro or not. Furthermore, the government balances its budget such that G=T. 8. Derive the new intertemporal budget constraints for the pro and non-pro cases in terms of r, C, Y, S, and T. 9. Briefly and intuitively, are you more or less likely to go pro under this government policy, and why? If you are an athlete, how much of your tax T will the government eventually ‘return’ to you

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter5: Income And Substitution Effects

Section: Chapter Questions

Problem 5.9P

See similar textbooks

Similar questions

Teresa spends her entire scholarship of PLN 600 for the purchase of drinks and food. 1. Draw Teresa's budget restraint line knowing that her favorite drink costs 5 zlotys per bottle and the dinner price is 20 zlotys. 2. How will Teresa's situation be affected by the increase in dinner price to PLN 25? 3. What will happen if the price of the drink is reduced to PLN 2.5? 4. Assess following quantitative combinations: •125 drinks i 20 dinners •80 drinks i 20 dinners •40 drinks i 20 dinnes
Problem 3 - Should I become professional athlete? Suppose you are considering becoming a professional athlete. Whilst a pro athlete can expect to make a lot of money when they're young, they may struggle to find gainful employment later in life. If you decide against going pro, you can expect a much steadier income, though perhaps not quite as lucrative at 21. Which will you choose?!? Let's set this up formally. Suppose that you live for two periods, t =1,2. If you go pro, in t=1, you will earn YP, which is more than what you would earn in t=1 if you do not go pro, Yņº; i.e. Y? > ymp However, in period t=2, as a pro you will earn zero: Y₂ = 0. By contrast, Yp > 0. Being a pro athlete makes you a prominent public figure. In period t=1, you have to pay security guards a fixed amount S to keep you safe from the mob of fans who no doubt follow your every insta. Once your professional career is over, you are quickly forgotten, so you don't have to spend anything on security in t=2 (Sad ®).…
Question 4 If the semi-elasticity between x and y is -2, what does it mean? A. When x decreases by 2%, y increases by 5% B. When x decreases by 1 unit, y increases by 2% C. When x decreases by 1%, y increases by 2 units OD. When x increases by 1%, y decreases by 2 units E. When x increases by 2%, y decreases by 4% OF. None of the options given are correct
The government of the island nation of Autarka has become increasingly concerned aboutthe health and wellbeing of low income households. Medical experts stress the importanceof a healthy diet in this regard. They have determined that, ideally, a household wouldconsume at least 5kg of fresh fruit and vegetables each week.The government has proposed implementing a new voucher scheme to ensure that the5kg per week consumption target is met. Under the government’s proposal, the voucherswould be redeemable for fresh fruit and vegetables, but could not be used for other typesof food, or for non-food consumption. Moreover, to limit the cost of the voucher scheme,the value of the vouchers sent to a household would be linked to the household’s income.Community groups in Autarka have expressed concern that a voucher scheme is unnec-essarily paternalistic; depriving low income households of the choice of how to spend theirincome. These groups argue that the government’s consumption targets could…
Elasticity. At the current price of cigarettes at P25 per pack, current consumption wasdetermined to be 50,000 packs per month. The producers are contemplating an increase inthe price of P3 per pack, but they are apprehensive that consumption might drastically fall.An economist knows that such price increase would reduce consumption by 20%.c. Compute for the arc elasticity of demand for cigarettes between the given pints.d. Should the producers push though with their contemplated action or not? Why?
1. You want to earn extra money to take your family to Disney Land so you debate whether you should increase your price or not. If your business sells 800 units per month at $20/unit. And studies reveal that your product loses 5% of it customers with every $1 increase in price. If you increase your price to $23. *You must show all of your calculations and identify the type of elasticity for the product for full marks What is the coefficient for the elasticity of demand? _________ [2] Identify the type of elasticity. _________________ [1] What would you recommend to the owner in order to help achieve their goal? [2] ____________________________________________________________________
a. Define price elasticity of demand, and cross-price elasticity of demand. b. If the cross-price elasticity of demand between two goods is negative (EXY<0), what can be said about the relationship between these two goods? c. If the Boston Red Sox know that the demand for their tickets is elastic (ED>1), should they increase or decrease the price of their tickets in order to increase total revenue? Explain.
The price elasticity of demand is more likely to be inelastic if Othere are a lot of substitutes available. O the price of the product is a large fraction of income. Othere is a long time frame involved. O the product is a necessity.
2. Engineer need to consider the demand of the product while making business decisions. List the major purpose of demand analysis from the standpoint of business management. Can a manager manipulate all the variables which affect demand, Explain in detail along with different concepts of elasticity of?
Sabine loves to support her local sports teams. She has an annual budget of $400 to divide between basketball games and football games. Tickets to a basketball game cost $25, and tickets to a football game cost $100. вс, Football games BC, 3 1 - 8 12 16 20 24 28 32 Basketball games reset a. Graph Sabine's budget constraint for basketball games and football games. Use the tool provided (BC1) and draw only the endpoints such that the first point touches the vertical axis and the second point touches the horizontal axis. b. Suppose the basketball team has a losing season and decides to decrease the price of a ticket to $20. Draw Sabine's new budget constraint.Use the tool provided (BC2) and draw only the endpoints such that the first point touches the vertical axis and the second point touches the horizontal axis. c. After the price decrease from (b), what will happen to Sabine's consumption of basketball and football games? According to the income effect, the quantity of basketball games…
In this problem, p is in dollars and q is the number of units. Suppose that the demand for a product is given by 2p²q = 10,000 + 5000p2. (a) Find the elasticity when p $50 and q = 2502. (Round your answer %3D (b) Tell what type of elasticity this is: unitary, elastic, or inelastic. Demand is unitary elastic. Demand is elastic. O Demand is inelastic. (c) How would revenue be affected by a price increase? An increase in price decreases revenue. An increase in price increases revenue. Revenue is unaffected by price.
The demand for a product is more elastic if the product represents a small portion of the individual's budget. O more elastic if it is over a short time horizon. O more elastic if there are many substitutes for product. O more elastic if there are few substitutes for product. E P tv MacBook Pro 30 F7 F8 F6 FS %24 & %2* 7