Econ - Assignment Example

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So, if the employee consider that the tax refund is permanent (i.e. will not be adjusted upwards at some point in the future) he will consider he has a greater disposable current income (represented by an outward shift in the budget constraint from ω to ω’). In the other case, the employee will use the tax refund for savings (a shift from ω to ...
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Moreover, C must be indifferent to A, but this can happen if C is preferred to A. As a conclusion, indifference curves cannot cross.
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