Government decides to impose a tax on gasoline

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Suppose the government decides to impose a tax on gasoline and use the revenues to reduce income taxes in a manner such that consumers' income tax reduction equals the amount of gasoline tax paid. Using indifference curves and budget constraint analysis, illustrate whether or not the typical consumer is better off, worse off, or neither, as a result of this policy. Explain.

Reference no: EM131244521

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