Question: For the following questions write whether the statements are true or false and give full justification for your answer.

a) For a given income level, it is not possible to have both good 1 and good 2 as luxury goods.

(b) If the demand for good 1 decreases as the money income increases the demand for good 1 would also increase when price of good 1 increases.

(c) Suppose the government imposes an income tax to the rich and give back the same amount of money as subsidy to the poor, since the total income (m1 + m2 + . . . mn = M) remains constant, the aggregate demand for good 1 would not change after the tax. (Assume prices are not affected by the tax rate).