Suppose a consumer's preferences over two goods x1 and x2 are given by u=x1x2. Her income is M and the two goods cost p1 and p2 per unit respectively. Now suppose the government imposes a proportional tax t on the value of the good x1 (such as VAT). If the government wants to compensate in such a manner that the consumer can buy the old bundle (i.e., the bundle before the price rise), how much compensation should the government provide? After receiving the compensation how much of x1 and x2 would the consumer actually buy? Also, show your answer graphically. Suppose a consumer's preferences over two goods x1 and x2 are given by u=x1x2. Her income is M and the two goods cost p1 and p2 per unit respectively. Now suppose the government imposes a proportional tax t on the value of the good x1 (such as VAT). If the government wants to compensate in such a manner that the consumer can buy the old bundle (i.e., the bundle before the price rise), how much compensation should the government provide? After receiving the compensation how much of x1 and x2 would the consumer actually buy? Also, show your answer graphically