Indifferent between the two types of subsidy

Reference no: EM133644000

Question

A government gives each welfare recipient 5 pills of drug Xper month at $1 per pill. The market price is $5 per pill. Assume that income is M and price of other good Yis $1. Suppose that utility is maximized at the kinked point.

a. How many units of X and Y will be consumed?

b. How much cash subsidy would be required to make the individual approximately indifferent between the two types of subsidy?

Reference no: EM133644000

Questions Cloud

Price elasticity of demand and price discrimination : Explain the relationship between the price elasticity of demand and price discrimination.

Discuss what the opportunity cost of attending college : Discuss what the opportunity cost of attending college is for you, noting that the concepts of opportunity costs and explicit monetary costs are not the same.

Factors can influence projects-company cost of capital : Explain how these factors can influence a project's/company's cost of capital. Use case studies to illustrate your answer.

Explain the principle of comparative advantage : Explain the principle of comparative advantage. Does it tells us how the gains from trade will be distributed?

Indifferent between the two types of subsidy : How much cash subsidy would be required to make the individual approximately indifferent between the two types of subsidy?

Diversity would provide security against real estate crisis : The large number of mortgages and their diversity would provide security against a real estate crisis?

Pareto efficiency exchange equilibrium : We showed how a Pareto efficiency exchange equilibrium can be described as the solution to a constrained maximum problem.

Money is lubricant in the economy : Money is a lubricant in the economy just like you have oil in your car engine. Money lubricates the wheels of the economy,

Dollars fulfill three important economic functions : Dollars fulfill three important economic functions. Are giant stones as money any more strange than relying on gold?

User Account

All Pages