The primary lesson is that, for this consumer, if the government needed to raise $16.67 of tax revenue, the lump sum tax is better than the quantity tax because the consumer’s maximum utility is highe...The primary lesson is that, for this consumer, if the government needed to raise $16.67 of tax revenue, the lump sum tax is better than the quantity tax because the consumer’s maximum utility is higher under the lump sum tax. Figure 3.21 makes clear that the lump sum tax enables attainment of a higher level of utility than the quantity tax because the indifference curve attainable under the lump sum tax is higher than the indifference curve that maximizes utility with the quantity tax.
