2 Consumption tax Suppose that the gmernment imposes a proportional tax on consumption. That is. for a mnemo- tion of size :2. the consumer has to pay c a 1'" to the government1 where 1" is the proportional tax rate. |_|. . 1Write the budget equation and thaw the budget line in our usual mnsurnptionfleisure graph. M . What is the effect of a decrease in the tax rate 1'" on the choices of the consumption and leisure? P3 Interpret your answer using income and substitution effects. in. . From assignment 1, we have seen the La'er curve for labor tax. Here, does the tax Laifer curve still exists for consumption tan? 3 - is consumption tax and Ti is labor tax rate. We have the time constraint i+ N5 = 1 was\"-.. Fl AC