1. Is the following statement true or false? Explain your reasoning using graphs. “Every Giffen good...

1. Is the following statement true or false? Explain your reasoning using graphs. “Every Giffen good must be inferior, but not every inferior good exhibit the Giffen paradox.”

2. Using income and substitution effects, show that the size of the welfare loss caused by taxes will depend on how a tax is structured. Specifically, show (graphically) that taxes that are imposed on general purchasing power will have smaller welfare loss than will taxes imposed on a single commodity. (the Lump-Sum Principle)

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Rahul Sunny answered 1 year ago

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