Reference no: EM13501004

Jason spends all of his income on two goods: soda and pizza. the government introduces a new 'soda tax' that taxes pizza.

A) show the effect of a tax on soda on jason's budget constraint

B) draw on your diagram the revenue raised by the tax on pizza

C) what would jason's budget constraint look like if the government imposed a lumps sum tax that make jason as well off as under a tax on soda?

D) what would jason's budget constraint look like if the government imposed a lump sum tax that raised the same revenue as the tax on soda?

E.) using your diagram/analysis and the defintion of pareto efficiency, explain why the tax on soda is not pareto efficient.