What income tax rate is equivalent to this commodity tax

Reference no: EM133436013

Assignment:

Kevin has an income of $Y and spends it only on food and music. PF and PM denote the prices of food and music, respectively, and quantities os denoted by QF and QM . In the absence of taxes, Kevin's budget constraint is Y = PF*QF + PM*QM . Now suppose an ad valorem tax of 25 percent is imposed on both food and music. What income tax rate is equivalent to this commodity tax?

Reference no: EM133436013

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