Ejercicio Exercise 3 · Microeconomía II UPF 2015

Exercise 3 (5 points). Billy's budget line with quantity tax

Billy has an income $m$ to divide between beer and natural juice. Under standard conditions, he consumes 10 beers. The authority decides to discourage excessive alcohol consumption by levying a per-unit tax $t$ on every beer purchased beyond the first 5 units. What happens to the shape of Billy's budget constraint?