2. (10 ) David's monthly income is $575 and he spends all of his income on good x and good y. The prices of the two goods are px=$25 and py=$5. (1) Write down David's budget line and draw his budget constraint. Show these result in a figure. (2) Suppose now the government imposes a uniform ad valorem sales tax on the two goods with a tax rate of 15%. Write down David's budget line and show it in the figure of (1). (3) Suppose that the government imposes an income tax on David's income instead. To obtain the same amount of tax revenue as that in (2), what is the tax rate on income? How much of the income tax does the government obtain? Write down the budget line and show it in the figure of (1). 2. (10 ) David's monthly income is $575 and he spends all of his income on good x and good y. The prices of the two goods are px=$25 and py=$5. (1) Write down David's budget line and draw his budget constraint. Show these result in a figure. (2) Suppose now the government imposes a uniform ad valorem sales tax on the two goods with a tax rate of 15%. Write down David's budget line and show it in the figure of (1). (3) Suppose that the government imposes an income tax on David's income instead. To obtain the same amount of tax revenue as that in (2), what is the tax rate on income? How much of the income tax does the government obtain? Write down the budget line and show it in the figure of (1)