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Tutor could you please help me understand this question, I assume they are worse off due to consumption falling in regards to low elasticity of

Tutor could you please help me understand this question, I assume they are worse off due to consumption falling in regards to low elasticity of demand leading to the substitution effect overpowering the income effect, but I don’t fully understand the question and could use some clarification.

If the federal government taxes gasoline but returns the entire money back to citizens, are citizens

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better off, worse off, are unaffected by this policy? Assuming that all citizens are identical in their income and preferences.

using a graph with gasoline on the X-axis and composite good on the Y-axis. Explain the answer in terms of income and substitution effects.

 

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