Report on the effect of electricity tax on the small income household.
In Autarka, households that use electricity obtain it from mainly burning fossil fuel, which has been defined as a significant contributor to the world’s climatic change. To combat this problem, the government has proposed to impose a 50% tax to provide the initiative to save on electricity. With this in mind, we sought out to research to investigate and estimate the impact of the proposed tax on low-income households to ensure that the tax does not worsen their state of living. Questioning a sample of the families has been chosen as the best way to collect data for this research.
Analysis
During the surveys carried out on the households, some of the questions asked were as follows:
- How many people are in the household?
- How Many people in the household have an income?
- What is the total income for the household?
- Does the household have electricity?
- What is the average monthly electricity consumption?
To determine the marginal rate of consumption for each household, we required the data provided by a household representative. The marginal rate of substitution was derived using two formulas, and the first included finding the square of the quantity of the composite good consumed by the household. In contrast, the second involved finding the double of the product of the electricity consumed by the household and the composite goo consumed.
The electricity demand function was derived by using the utility function and substituting the values. The electricity function was obtained by dividing the utility by the square of the composite good consumed, which would infer the electricity demand function would be derived by finding the product of the average electricity consumption, $100, and the division of utility by the square of composite goo consumed by the household.
The third thing we had to derive was the Households optimal consumption basket without any regards to the tax. This was done by observing and applying the data that was collected from the household. The utility for each household was determined by finding the product of the household’s electricity consumption and the composite good consumed with regard the price of electricity being place at $100 per MWh, with no regard to the tax. The figure derived can the be used to find out the utility for each household.
The report the involved deriving the optimal consumption basket of a carbon tax is applied to the electricity. To find the household’s optimal consumption basket, we had to derive it by finding the product of the household’s electricity and the square of composite good consumed by the household. This was determined with regard to the price of electricity imposed on a 50% tax, which would raise the price of electricity to $150.
“Da Silva Freitas, L.F. 2016 concludes that to determine the level of compensation that the government would impose to households from being over-imposed by the tax was determined by finding out the level of decomposition consumption of the household which provided the initial level of utility for each household”
PRESS RELEASE ON THE EFFECT OF TAX ON SMALL INCOME HOUSEHOLD
Release of report to describe the effects of tax on small income households of Autarka;Dear esteemed audience, in the recent past A research on the effects of the proposed tax of electricity was done by a team determined to find out the effect of the tax on low income households, the team conducted the research by doing a survey on the sample population on the people of the island of Autarka. The data collected was then used for analysis and results presenter to you, an audience of professional economists, the research involved finding the average income for this households, their average electricity consumption and the composite good consumed for the household, the report describes how this data was achieved, how the data was used to derive the conclusions and the conclusions that were obtained by the researchers.
The report then describes the importance of reexamine the tax to be implements on the electricity bills. The detailed report will be release together with the data used in this research.
REFERENCES
Da Silva Freitas, L.F., de Santana Ribeiro, L.C., de Souza, K.B. and Hewings, G.J.D., 2016. The distributional effects of emissions taxation in Brazil and their implications for climate policy. Energy Economics, 59, pp.37-44.
Huang, C.C. and Marr, C., 2012. Allowing High-Income Bush Tax Cuts to Expire Would Affect Few Small Businesses.
Shammin, M.R. and Bullard, C.W., 2009. Impact of cap-and-trade policies for reducing greenhouse gas emissions on US households. Ecological Economics, 68(8-9), pp.2432-2438.