Reference no: EM131674974

In Australia, the government provides child care subsidies to anyone earning less than $350,000 a year (read the article from the link below for detail).

https://www.news.com.au/lifestyle/parenting/what-the-child-care-changes-mean-for-you/news-story/75447014c6e02d23f2b6aec34711e5d9

a) Assume that Doreen's family earns $60,000 a year and currently they spend $10,000 on childcare services, and the remaining income on other goods. Illustrate Doreen's family's optimal bundle (before a subsidy from the government), knowing that her family would never spend more than 50% of the income on childcare service.

b) With a subsidy of 85% of the total childcare cost from the government, would this optimal bundle change? (Assume there is no time lag between the time the family pays the childcare fees and when they receive the subsidy from the government). In Australia, the government provides child care subsidies to anyone earning less than $350,000 a year (read the article from the link below for detail).

https://www.news.com.au/lifestyle/parenting/what-the-child-care-changes-mean-for-you/news-story/75447014c6e02d23f2b6aec34711e5d9

a) Assume that Doreen's family earns $60,000 a year and currently they spend $10,000 on childcare services, and the remaining income on other goods. Illustrate Doreen's family's optimal bundle (before a subsidy from the government), knowing that her family would never spend more than 50% of the income on childcare service.

b) With a subsidy of 85% of the total childcare cost from the government, would this optimal bundle change? (Assume there is no time lag between the time the family pays the childcare fees and when they receive the subsidy from the government).