Consider the following hypothetical scenarios:
Scenario A: You are about to purchase a pair of 7 for All Mankind jeans for $175 and a t-shirt for $45.
The sales attendant at the store tells you that the pair of jeans you wish to buy is on sale for $160 at another store, located about a 20-minute drive away.
Scenario B: You are about to purchase a pair of 7 for All Mankind jeans for $175 and a t-shirt for $45. The sales attendant at the store tells you that the t-shirt you wish to buy is on sale for $30 at another store, located about a 20-minute drive away.
Based on standard economic theory, under which scenario would you make the 20-minute trip to the other store?
A) Scenario A because the pair of jeans is a very expensive item and $15 saving is quite substantial
B) Scenario B because a $15 saving amounts to a substantial discount (about 33 percent)
C) in either scenario if I think a $15 savings is worth the 20-minute trip
D) in none of these scenarios if I think the $15 saving is not worth the 20-minute trip
E) C and D are correct answers.
E
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The idea of two individuals being equally well off in the absence and existence of taxation is
A. time consistency of optimal taxation. B. flat tax income schedule. C. benefits received principle. D. utility definition of horizontal equity.