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Problem:
(a) Explain with the help of a diagram, the effect on a consumer's equilibrium, of an increase in the price of commodity X while the consumer's money income and price of commodity Y remains unchanged.
(b) If the government intends to restore the consumer's current welfare to its original level, illustrate how would the process of income compensation proceed to realise that objective.
Consider a model world which is subject to a risk of global climate change. The damage is known to be from greenhouse gas (GHG) emissions as indicated by the marginal damage curve
outline of this assignment
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