Solution-Draw the budget constraint faced by the consumer

Draw the budget constraint faced by the consumer

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Reference no: EM133082289

Assume the government has two policy options, a cash grant of $200 and providing food stamps worth $200. El.

Draw the budget constraint faced by the consumer in each of these two situations. Suppose that without government support households have $300 of income per month.

Use graph above to draw a set of indifference curves that corresponds to an individual who would be indifferent between these two policies.

On the same graph draw a set of indifference curves corresponding to an individual who would prefer to have a cash grant rather than food stamps.

Is there a consumer who strictly prefers food stamps to cash grants (i.e., is better off with food stamps rather than a cash grant?) Why does the government use food stamps?

Reference no: EM133082289

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Draw the budget constraint faced by the consumer

Reference no: EM133082289

Reference no: EM133082289

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