Question

Question 2: Annie and Marty are both single parents with full-time jobs. Consequently, both value child care services (S) and children's clothing (C) but may have different preferences for the two goods. The government decides it wants to make life easier for single parents and is considering providing single parents with monthly child care vouchers or, simply, providing single parents with a cash payment every month. Suppose Annie and Marty's incomes are both 400, the price per unit of child care is 10 per unit and the price per unit of clothing is 20. (a) Draw Annie's budget constraint assuming the government decides to offer a $100 voucher (b) Draw Marty's budget constraint assuming the government decides to offer a $100 cash (c) Draw an indifference curve representing Annie's preferences that is consistent with Annie (d) Draw an indifference curve representing Marty's preferences that is consistent with Marty for child care. payment to single parents. strictly preferring the cash payment to the voucher being indifferent between the cash payment and the voucher.

Answer 1

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