Economy

Suppose there are three types of consumers: ui (x, y) — min(x, 3y), u2 (x, z) = xz and y0.25 z 0.75 U3 (y, z) where x and y are different consumption goods, and z is a natural resource (such as gas/oil). Consumer of type 1 owns the endowment of 100 units of the natural resource z and 50 units of capital K.
Additionally, there are 2 competitive firms producing consumption goods. Firm 1 uses capital to produce good y with technology and is owned by the consumer of type 2. Firm 2 uses the natural resource to produce consumption good x with technology and is owned by the consumer of type 3.
Policy: Per unit tax of 10% on the natural resource applied to all users of the resource, which is equally distributed as a lump sum subsidy to all consumers.

Sample Solution

ACED ESSAYS