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Suppose John's parents have provided him with a trust fund that pays for his college education....

Suppose John's parents have provided him with a trust fund that pays for his college education. In order to receive the entire trust fund he must spend it only on education.
a. Is John better off with this trust fund than without? Use a graph of the consumer choice model to illustrate your answer.
b. Suppose instead that John's trust fund was made available to him as cash which he could spend on anything he wished. Is John better off with this trust fund than without? Use a graph of the consumer choice model to illustrate your answer.
c. Which form of the trust fund would John's parents prefer? Why?
d. Which form of the trust fund would John prefer? Why?
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Answer #1

6) Beeloo ences ef John Boedion&- the things, et paymeut by hust Rund-e,, Speut only on Co) educD New Bc(No additional м, since e, con(- be spent on m) →. yes Tohn is better呦, Bo2 NOD %) Now this Cash Could kuspeut M, then New Bc.-) MıBC , Now Joho is shill beter wity hust fund, Congn porbilther with New income got expanded, than wlo. Bund. Johns Pakeutr wis prejes, wien und coudl be speut uly ow edue, buoz then John cant spend the mot igivew by helb uot on , buos then Re can have les e, tham wjo burd buox then Ke cam Speud the uhudy.

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