Question 1. [25 marks] When the Australian Government introduced the "carbon tax' on 1 July 2012, it was accompanied by a package of tax reforms and other compen- sation measures designed to make the average household at least as well oil despite the rise in electricity prices resulting from the imposition of the carbon tax. (a) [10 marks] Using the standard model of rational choice: analyse the effect of an increase in the price of electricity accompanied by a compensation package that increases the household's income by the amount that its expenditure on electricity would need to rise in order to purchase the same quantity of electricity that it was demanding before the price rise. In particular argue why the Government. was expecting such a household to reduce the quantity of electricity it demanded and for that. household to be made better off as a result. of these changes. (b) [10 marks] Repeat your analysis but this time for a household that exhibits loss aversion. (c) [5 marks] For such a household1 how else might. the Government. encourage it to reduce those activities (such as its demand for electricity) that contribute to green- house gas emssions