Minimum welfare level for the poorest senior household, Microeconomics

Assignment Help:

Consumer Behavior:

The government considers different calculations to help senior citizens with their increasing heating bills. One proposal on the table is to pay 20% of senior citizens' heating bills out of public funds. Another part is to pay a fixed amount of money to each senior household. Using indifference curve analysis, show the different effects of the two calculations! Under which option could the draw on public funds be greater, if the government plans aim at guaranteeing a minimum welfare level for the poorest senior household? Which calculate would you consider environmentally more friendly?

Answer: A subsidization of the heating bill could result in a price reduction of heating oil relative to the price of the composite good Y. With a direct income transfer, the household increase from the old optimum E to the new optimum A. The income transfer MN essential to reach the guaranteed indifference curve i* is smaller than the subsidy essiential to reach the subsidy LK necessary to reach this indifference curve. In addition to the income effect x0 x1 there is the substitution effect x1 x2 as heating oil becomes relatively cheaper. Due to the substitution effect, the environmental effect of the subsidy could be detrimental as well.

1870_Minimum welfare level for the poorest senior household.png


Related Discussions:- Minimum welfare level for the poorest senior household

#title.microeconomics issues., how microeconomic issues maybe represented ...

how microeconomic issues maybe represented using production posibility curve

Miroeconomics, when the demand function is 2Q-24+3P=0,find the marginal rev...

when the demand function is 2Q-24+3P=0,find the marginal revenue when Q=3.

Industrial policy, Industrial Policy: Government policies which are aimed a...

Industrial Policy: Government policies which are aimed at fostering the domestic development of particular desirable or productive industries, in order to enhance productivity, cre

Explain total fixed and variable costs, Fixed costs are those which are ind...

Fixed costs are those which are independent of output that is they do not change with changes in output. These costs are a fixed amount which must be incurred by a firm in the shor

Price elasticity of demand and of supply, List and describe the determinant...

List and describe the determinants of the price elasticity of demand and of supply.

Economics final paper analysis, This is what this paper should be about ...

This is what this paper should be about 1) In the first paragraph analyze what you most learned from the course to reflect on the statement below. 2) In each separat

Market failure, causes of market failure and its solutions?

causes of market failure and its solutions?

Haberler''s theory of opportunity cost, How has the Harberler''s theory of ...

How has the Harberler''s theory of opportunity cost an improvment over the classical theory of trade?

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd