a. The Smith family has an income of $1,000 per month, and currently spends $400 monthly...
a. The Smith family has an income of $1,000 per month, and currently spends $400 monthly on food. Assume that the initial price of a unit of food is $1, and the initial price of a unit of “all other goods” is also $1. Draw this budget line, and also an indifference curve – which we assume has the standard shape – that the family can just reach, given its budget.
b. The government considers that the Smith family is rather poor, and is discussing a number of possible ways to help. For each of the following, draw the new budget line:
b.1. The government provides income support in the form of a grant of $250.
b.2The government provides food stamps worth $250. These may only be spent on food.
b 3.The government provides a discount card that will allow the family to buy anything at half price, but only for the first $500 worth of purchases.
c. Which of the options in 8.b would the Smith family prefer? Why?
Homework Answers
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a. The Smith family has an income of $1,000 per month, and
currently spends $400 monthly...
Q11. Consider a family with a cash income of $1,000 per month. With food on the...
Q11. Consider a family with a cash income of $1,000 per month. With food on the horizontal axis and income on the vertical axis, and assuming the price of food is $1: (a) Illustrate the equilibrium of a family who spends 60% of their income on food. (b) Suppose now this family is eligible for food stamps: It pays $200 per month to obtain $600 worth of food. Draw this family's new budget constraint. (c) Illustrate the family’s new equilibrium...
Suppose a family spends their income on two things: education (S) and all other goods, (X)....
Suppose a family spends their income on two things: education (S) and all other goods, (X). The family earns $60,000 a year. A unit of education costs $10,000 and a unit of other goods costs $15,000. a) Write the equation for the family’s budget constraint. b) Draw the family’s budget constraint. Put education spending on the x-axis and spending on all other goods on the y-axis. c) The local government opens a public school, which offers $20,000 worth of education...
Assume that Jean has an annual income of $50,000, and she spends her income on milk...
Assume that Jean has an annual income of $50,000, and she spends her income on milk (X) and all other goods (AOG) (Y). The price of milk is $2, and the price of AOG is $1/unit. Her preferences can be represented by convex indifference curves. a. (4 pts) Illustrate her optimal choice (X*,Y*) on a graph, using indifference curve-budget line analysis. (Note: you do not have enough information to have numerical answers for X* and Y*). b. (11 pts) In...
2. Suppose that Jesse earns $1,000 per month which she allocates between food and other goods....
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Catherine has a monthly income of $500, which she
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2. Catherine has a monthly income of $500, which she spends on pizzas and a composite of all other goods. The price of a pizza is $5 a. Draw Catherine's budget constraint. Label your values of the intercepts and the slope of the budget constraint. (Place pizza on the horizontal axis) b. Assume Catherine...
1) Consider a poor person’s annual income of $ 1200. He spends his income only on...
1) Consider a poor person’s annual income of $ 1200. He spends his income only on vegetable and rice. The price of rice is $8/lbs. in the entire town and the price of vegetable is $12/lbs. in the town. Please draw this person’s Budget line, whereby rice is supposed to be on the horizontal Axis and vegetables on the vertical axis. a) Assume that the student considers rice and veggies neither as perfect complements, nor as perfect substitutes. Based on...
Assume that Jean has an annual income of $50,000, and she spends her income on milk (X) and all o...
Assume that Jean has an annual income of $50,000, and she spends her income on milk (X) and all other goods (AOG) (Y). The price of milk is $2, and the price of AOG is $1/unit. Her preferences can be represented by convex indifference curves. a. (4 pts) Illustrate her optimal choice (X*,Y*) on a graph, using indifference curve-budget line analysis. (Note: you do not have enough information to have numerical answers for X* and Y*). b. (11 pts) In...
1. Compare the three options in terms of effectiveness and equity. What are the substitution and income effects of the lump-sum income grant and voucher? Note: Explain by drawing indifference curves...
1. Compare the
three options in terms of effectiveness and equity. What are the
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curves and budget lines. Let the X-axis denote national park visit,
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Option 1: The
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Fill in the Blanks A consumer has $140 in monthly income to be spent on two...
Fill in the Blanks A consumer has $140 in monthly income to be spent on two goods A and B. The price of good A (PA) is $5.00. In the market, they can trade 2 units of good B for 1 unit of good A. The price of good B is $ (round your answer to two decimal places). If they used all their income on good A, they could purchase units (round your answer to two decimal places). Fill...
JUAL LACICISU 3.4 Consider the demand function for processed pork in Canada. Question Q-630.00-37p.20 3. The...
JUAL LACICISU 3.4 Consider the demand function for processed pork in Canada. Question Q-630.00-37p.20 3. The supply function for processed pork in Canada is 000 p is the price of pork Qis the quantity of pork demanded masured in a peryeart 19.00 se - As the price of bof 54 per kg is the price of chicken per kg Y the income of consumers = $12.500 the price of a log - $1.50 per kg Sve for the equilibrium price...
2. Suppose that Jesse earns $1,000 per month which she allocates between food and other goods. Assume that the average price of a unit of food is $5 and the price of other goods as $1. Currently, she maximizes her utility by purchasing 25 units of food each month. [5] a. With other goods on the y-axis and food on the x-axis, illustrate Jesse's budget constraint and an indifference curve at her optimal bundle. Label all relevant values. b. In...
Catherine has a monthly income of $500, which she
spends on pizzas and a composite of all other goods, the price of a
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1. Compare the
three options in terms of effectiveness and equity. What are the
substitution and income effects of the lump-sum income grant and
voucher? Note: Explain by drawing indifference
curves and budget lines. Let the X-axis denote national park visit,
and the Y-axis denote other goods spending.
Option 1: The
government provides 50% of a price subsidy on the entrance fee; the
government provides $1 of funding from the state for each $1
expended on a national park visit....
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JUAL LACICISU 3.4 Consider the demand function for processed pork in Canada. Question Q-630.00-37p.20 3. The supply function for processed pork in Canada is 000 p is the price of pork Qis the quantity of pork demanded masured in a peryeart 19.00 se - As the price of bof 54 per kg is the price of chicken per kg Y the income of consumers = $12.500 the price of a log - $1.50 per kg Sve for the equilibrium price...
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