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

Exchange rate policy - imf, Exchange Rate Policy: After the second ame...

Exchange Rate Policy: After the second amendment to the Articles of Agreement of IMF which came into effect on April 1, 1978, every member is free to choose its own exchange r

2 econ problems, I have the answers to these two questions, but I need to k...

I have the answers to these two questions, but I need to know HOW to get these answers. Thanks. Question 1 Suppose there are two goods beverage and pizza and two inputs land, T

Decreasing marginal returns and negative marginal returns, What is the diff...

What is the difference between decreasing marginal returns and negative marginal returns?

Measures to promote growth - structure of national income, MEASURES TO PROM...

MEASURES TO PROMOTE GROWTH: In view of the recent global experience, the following steps need be taken to accelerate the rate of growth.  1) Mastering and constantly improv

Demand and supply, what will be the effect on price and quantity when suppl...

what will be the effect on price and quantity when supply and demand changes in different directions but same magnitude?

Price mechanism, how does the prices system affect a country

how does the prices system affect a country

An exception - OECD economies, An Exception: OECD Economies It isn't i...

An Exception: OECD Economies It isn't inevitable that there be such divergence. United States--with its 14 to 25-fold increase in output per worker over the years since 1870-ha

Microeconomics., In a perfectly competitive market the price of the product...

In a perfectly competitive market the price of the product is?

Marginal product theory, Marginal Product Theory a.    What is the MC ...

Marginal Product Theory a.    What is the MC of output in the short-run? b.    What is the MC of labor (employed)? c.    What is the short-run profit-maximizing decision

Monopsonist labour market, what are the advantages of a monopsonistic labou...

what are the advantages of a monopsonistic labour market

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