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Business · Economics
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Multiple choice question
The explanation for this problem will require some algebra. Consider the effects of
the following changes in product prices and money income on Perry's welfare:
I. A sales tax of 25 percent on goods X and Y, the only two goods in the economy.
II. A 20 percent tax on income.
Choosing between the two budget lines, Perry would prefer
a. I
b. II
c. I, only if Perry's indifference curves are relatively steep with respect to the X-axis
d. I, only if Perry's indifference curves are relatively steep with respect to the Y- axis.
e. neither I nor II; Perry would be indifferent between the two

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