Assume that consumers have convex indifference curves

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Suppose that in 1990, the price of bread was $2 per loaf and the price of milk was $1 per gallon. By 2000, the price of brad rises to $3 per loaf, and the price of milk rises to $2 per gallon. Assume that consumers have convex indifference curves, and that consumer incomes do not change over the time period. Further assume that both goods are normal. The government, concerned about the loss in consumer purchasing power, wished to subsidize consumers. Prove graphically and explain why it will be less expensive to give consumers enough money to restore their original level of utility than to allow them to purchase their original consumption bundle. Please give me the detail steps

Reference no: EM13898418

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