I think I understood the highlighted part: basically, by increasing $g^1$ my utility increases because more public good is being provided but at the same time it decreases because I have less money to buy private good $x^1$ - so the effect of increasing $g^1$ is ambiguous.

My question about highlighted part is whether I can somehow see that on a graph below? As it would seem like when I set $g^2$ to be constant and then increase in $g^1$ would only cause my utility to decrease. Is there a way to represent the "initial increase in utility"?

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