Will joe be better or worse off after the price increase

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Reference no: EM13191961

When the price of gas in Italy is $5 per gallon, Joe consumes 1,000 gallons per year. The price rises to $5.50 and, to offset the harm to Joe, the Italian government gives him a cash transfer of $500 a year. Will Joe be better or worse off after the price increase plus transfer? What will happen to his gas consumption? Use indifference curve analysis to answer this question. Assume Joe has a typical indifference curve and gas and all other goods are normal goods to Joe in which he consumes a strictly positive amount.

Reference no: EM13191961

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