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I. Consider a consumer who consumes good 1 and good 2 with her income 11:. The price of the goods are given by 111 and

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I. Consider a consumer who consumes good 1 and good 2 with her income 11:. The price of the goods are given by 111 and p2. respectively. A. Suppose that a sales tax is levied on the consumption of good 2. Against the sales tax, what would happen to the consumption of good I? Identify all possible cases and provide the circumstances under which each case happens. Suppose that both goods are normal goods. Consider two different tax schemes: an income tax and a sales tax levied only on good I. Would the consumer prefer a I0% income tax to a 10% sales tax (assuming that the maximum amount of good I that the consumer can buy under each tax policy is approximately the same)? Why or why not? Eatplain your answer using a graph. Would the consumer prefer a 20% sales tax to a l0% income tax? Why or why not? Explain your answer using a graph

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