ECONOMICS
Question 1
OUR PROCESS
Order
Payment
Writing
Delivery
Why Choose Us: Cost-efficiency, Plagiarism free, Money Back Guarantee, On-time Delivery, Total Сonfidentiality, 24/7 Support, 100% originality
Assume that there are two categories of goods: protein shakes and all other products. ;
A. Show using diagrams how a consumer’s demand curve for protein shakes can be derived from ;
an indifference map and a budget constraint diagram. Make sure you explain your answer in ;
detail. ;
B. Using a different set of diagram/s deconstruct the price effect into the substitution effect and ;
the income effect. Take note to define each effect.
Question 2
;
Assume the production of coal involves the generation of a negative externality. ;
i. Explain how the equilibrium level of output would be determined in the market for coal, ;
assuming no attempt is made to internalise the externality. Is that equilibrium efficient? ;
Use a diagram(s) as part of your explanation. ;
ii. What is a Pigovian Tax? Explain how the imposition of a Pigovian Tax could alter the ;
equilibrium in this market. How does the tax impact on the efficiency of this market? Use ;
a diagram(s) as part of your answer. You are free to augment the diagram you used in (a) ;
in your answer to (b). ;
iii. What other solutions could be used to remedy this negative externality? You do not need ;
to describe these remedies in detail.