A consumer's budget constraint is initially given by

p

1

x

1

+ p

2

x

2

=m

. The government

then decides to provide a lump-sum subsidy of amount S to the consumer. At the same

time, a quantity tax of t

1

is imposed on good 1

t

, and a quantity tax of t

2

is levied on

good 2. This will lead to the consumer being better off than before.