How the existence of the black market affects the budget

Reference no: EM131490479

Question: 1. Would a government program that transferred income from the middle class to both the poor and the rich be supported by someone with the maxima social welfare function?

2. Consider the model of an in-kind transfer. Suppose that it is illegal for a recipient of the cheese to sell it. Never the-less, there is a black market, where cheese can be sold for $1 per pound. Show how the existence of the black market affects the individuals budget constraint Does it make her better off?

Reference no: EM131490479

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