yup. What you're missing is that

*if* we consume the same amount of oik (a big if), and *if* our tax burden is higher

then by definition we must have to spend more on oil than them (post tax)

so in your notation, although c goes up by a bigger % than z, z must be bigger than c

and to get the total effect on dispoable income, you have to multiply the percentage change in the price by the share of your income you spend on it

for us, the price goes up by a smaller % - but we're spending more of our income on it in the first place

the two offset exactly

if - as I say - we were buying the same amount of it in the first place.

Posted By: Tricky Hawes on June 13th 2008 at 13:52:18

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