Currently, the price of consuming housing is lowered by the fact that home mortgage interest is tax deductible.Suppose the government proposed to eliminate this implicit subsidy of your housing consumption and at the same time lowers taxes on all other goods.
a.With housing consumption on the horizontal axis and all other consumption on the vertical, illustrate you current optimal consumption bundle.
b.After looking over the government's proposal, you decide that you don't care one way or another whether the government implements this proposal.On your graph, indicate your new budget constraint and new optimal bundle under the proposal.
c.I also look over the proposal and find that my current consumption bundle also lies on the budget constraint I would face under the proposal.Am I also indifferent between the two proposals?

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The Answer of Currently, the price of consuming housing is lowered by the fact that home mortgage interest is tax deductible.Suppose the government proposed to eliminate this implicit subsidy of your housing consumption and at the same time lowers taxes on all other goods.
a.With housing consumption on the horizontal axis and all other consumption on the vertical, illustrate you current optimal consumption bundle.
b.After looking over the government's proposal, you decide that you don't care one way or another whether the government implements this proposal.On your graph, indicate your new budget constraint and new optimal bundle under the proposal.
c.I also look over the proposal and find that my current consumption bundle also lies on the budget constraint I would face under the proposal.Am I also indifferent between the two proposals?

Currently, the Price of Consuming Housing Is Lowered by the Fact