I am unsure how to complete the diagram above to any of the taxation methods. I was wondering if I choose the first option" Progressive tax that taxes the rich relatively more than the poor (not moving the endowment point)" how would I complete the diagram.

PROBLEM #3 [8 points]: Suppose that you are responsible for proposing an income redistribution program to the Ontario Minister of Finance. You have compiled the following analysis on the current division of weaith among the two major stakeholder groups in question {rich and poor). Yo or analysis depicts the current Pareto optimal aIIocation {E1} resulting from the initial endoments [ml]. a] it the social goal is to redistribute income between the rich and poor such that prices will lead to an alocation at E; then suggest a taxation method to achieve this goal without any loss in efficiency. Fill in the circle for your choice. [1 point] Progressive tart that taxes the rich relatively more than the poor [not moving the endowment point]. D Regressive tax that taxes the poor relativer more than the rich {not moving the endowment point}. 0 a) If the social goal is to redistribute income between the rich and poor such that prices will lead to an allocation at E2 then suggest a taxation method to achieve this goal without any loss in efficiency. Fill in the circle for your choice. [1 POiI'It] Progressive tax that taxes the rich relatively more than the poor (not moving the endowment point). 0 Regressive tax that taxes the poor relatively more than the rich (not moving the endowment point). 0 Lump sum tax on the rich that is given to the poor (moving the endowment point). 0 b) Complete your diagram above to include vaur taxation method that will achieve the allocation at E2. [2 Points} c): What are the conditions that must be present for your taxation method to be effective in avoiding a loss of efciency? [1 point] d) Discuss the effects of your income redistribution scheme on efciency and equity. [4 points]