Indifference analysis and optimum consumption question.
Suppose that the typical annual household consumption of electricity is 3,200 kWh. A new 5-pence per kWh tax is introduced, together with a £160 annual tax refund per household. Will the average household benefit from this new policy? Explain your answer graphically using indifference analysis.
I'm unsure on how to show the changes graphically as they haven't stated the exact budget or price of electricity.
I'm unsure on how to show the changes graphically as they haven't stated the exact budget or price of electricity.
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It seems too easy.. The average household will have to pay nothing.
Anyone know how this can be linked to indifference analysis?
Anyone know how this can be linked to indifference analysis?
Original post by Waloo
Suppose that the typical annual household consumption of electricity is 3,200 kWh. A new 5-pence per kWh tax is introduced, together with a £160 annual tax refund per household. Will the average household benefit from this new policy? Explain your answer graphically using indifference analysis.
I'm unsure on how to show the changes graphically as they haven't stated the exact budget or price of electricity.
I'm unsure on how to show the changes graphically as they haven't stated the exact budget or price of electricity.
I think PED is assumed to be inelastic given the nature of electricity. Household doesnt benefit
Original post by ThePersian
It seems too easy.. The average household will have to pay nothing.
Anyone know how this can be linked to indifference analysis?
Anyone know how this can be linked to indifference analysis?
Wait, what...?
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