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1/p2 X2 0 GST GST x1 1/pi Carefully argue why we can conclude that this consumer prefers (xCST, EST) over any of consumption bundles
1/p2 X2 0 GST GST x1 1/pi Carefully argue why we can conclude that this consumer prefers (xCST, EST) over any of consumption bundles found in (3), i.e., blue area. Then, explain why this finding implies that the consumer is never worse off under lump-sum, irrespective of her utility function (and for some utility function she is strictly better-off). That is, this GST (with some GST-free goods) is socially inefficient mechanism.
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