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Suppose you have an income of $100 to spend on two goods. Good 1 costs $25 per unit. Good 2 costs $10 per unit. Suppose
Suppose you have an income of $100 to spend on two goods. Good 1 costs $25 per unit. Good 2 costs $10 per unit. Suppose there is an 8% sales tax on both good 1 and good 2. Using the budget constraint equation, show that this tax is equivalent to an income tax. What income tax rate is this equivalent to?
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