A consumer can consume good 1 at p1 up to 1x , and then has to pay a tax t on the consumption of good 1 > 1x . The corresponding budget set is shown in figure 2.5: 

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X₁ - P₁ P2 P₁+t P2 There is a kinked point in the budget line. Q1: Can you write out the equation for this budget line? X₁ - P₁ P2 P₁+t P2 There is a kinked point in the budget line. Q1: Can you write out the equation for this budget line?

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P1Q1 P2Q2 I Where I is the total income and P1 and P... View the full answer