Adam Smith proposed taxing ‘Sugar, rum and tobacco’ because they are: “nowhere necessaries of life” “objects of almost universal consumption” In consumer theory economics, what is the difference between a necessity and a luxury good. What is the likely difference in the tax revenue obtained from a tax imposed on a necessity versus a luxury good? Explain and illustrate with appropriate figures. Question Requirements: Identify the difference between a necessity and luxury and provide an example. Highlight ability to identify the link of this definition to tax revenue. Highlight ability to encapsulate this concept precisely using correctly drawn figure.
Adam Smith proposed taxing ‘Sugar, rum and tobacco’ because they are: “nowhere necessaries of life” “objects of almost universal consumption” In consumer theory economics, what is the difference between a necessity and a luxury good. What is the likely difference in the tax revenue obtained from a tax imposed on a necessity versus a luxury good? Explain and illustrate with appropriate figures. Question Requirements: Identify the difference between a necessity and luxury and provide an example. Highlight ability to identify the link of this definition to tax revenue. Highlight ability to encapsulate this concept precisely using correctly drawn figure.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Adam Smith proposed taxing ‘Sugar, rum and tobacco’ because they are:
- “nowhere necessaries of life”
- “objects of almost universal consumption”
In consumer theory economics, what is the difference between a necessity and a luxury good. What is the likely difference in the tax revenue obtained from a tax imposed on a necessity versus a luxury good? Explain and illustrate with appropriate figures.
Question Requirements:
Identify the difference between a necessity and luxury and provide an example.
Highlight ability to identify the link of this definition to tax revenue.
Highlight ability to encapsulate this concept precisely using correctly drawn figure.
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