ILLUSTRATE THE BUDGET CONSTRAINT LINE OF THE SCENARIO: Ed has $M per month to spend on food, denoted F and all other goods, denoted X. The price of food is Pf,  the price of all other goods is $1

6a) Illustrate Ed’s optimal bundle assuming he has convex preferences.

6b) Now suppose the government imposes a sales tax of rate T on food, which raises the price of food.  Illustrate Ed’s new optimal bundle and his original optimal bundle using a new diagram.  

6c) Now suppose the government replaces the sales tax with an income tax that makes Ed indifferent between the sales tax and the income tax.  Illustrate 1) Ed’s new optimal bundle, 2) Ed’s optimal bundle from part 6b and 3) his optimal bundle from part 6a.

6d)  Under which tax (sales tax or income tax) does Ed consume more food?