Reference no: EM13863424
a) Family F has an income of $1000 per month, and currently spends $400 monthly on food. Assume that the initial price of a unit of food is $1, and initial price of a unit of "all other goods" is also $1. Darw a budget line and indifference curve, given its budget.
b) The government considers that family F is rather poor, and is discussing a number of possible ways to help. For each of the following, draw the new budget line:
1. Government provides income support in the form of a grant of $250.
2. Government provides food stamps worth $250.
3. Government will sell the family $500 worth of food stamps for a price of $250.
4. Government will provide a discount card that will allow the family to buy food at half the usual price, but only for the first $500 worth of food.
5. Government will provide a discount card that will allow the family to buy anything at half price, but only for the first $500 worth of purchases.
6. Government will provide a discount card that will give 50% off the price of food for the first $300 worth, and 25% off the price of food for the next $400 worth of food.
c) Which of the options in b) would family prefer and why?
For a) I have on x-axis point at $400 for food, and on y-axis point of $600, its budget line
For 1. b) I just shift parallel the budget line i have in a) by $250 . Am I right there?
For others I do not know how to draw each budget line.
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: Family F has an income of $1000 per month, and currently spends $400 monthly on food. Assume that the initial price of a unit of food is $1, and initial price of a unit of "all other goods" is also $1. Darw a budget line and indifference curve, given..
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