Essay
Barbecue sauce and chicken thighs are complement goods. Suppose that the government places a tax on chicken thighs to discourage the consumption of fatty meat.
a. What is the partial equilibrium effect of the tax on the barbecue sauce market?
b. What is the general equilibrium effect of the tax on the barbecue sauce market? Does general equilibrium analysis predict a larger or smaller effect on the equilibrium price and quantity of barbecue sauce than partial equilibrium analysis?
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a. The higher price for chicken thighs o...View Answer
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