Consider 2 goods with prices p1 = 4 and p2 = 6, and a consumer with income m = 200. The government imposes a sales tax on good 1. Suppose the sales tax is (a) a quantity tax t = 2 (dollars per unit). (b) an ad valorem tax of 30 per cent (t = 0.3). Compute and graph the consumer’s budget line without a tax, and for the taxes in (a) and (b), respectively.

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