Suppose a consumer purchases Food (F)and other goods (X)with their income of $100.For simplicity,suppose that food and other goods are measured in $1 units,so the price of each is $1.Currently,the consumer can purchase unlimited food stamps by paying 10¢ for $1 of food.With this,the consumer purchases 500 food stamps (for 500 units of food)and 50 units of X.As a result,the government must pay 90¢ towards food,for a total cost of $450.Using a graph of budget constraints and indifference curves,show that the consumer prefers to receive a cash gift of $450 over the food stamp option.

Question

Quizplus · Accepted Answer

The Answer of Suppose a consumer purchases Food (F)and other goods (X)with their income of $100.For simplicity,suppose that food and other goods are measured in $1 units,so the price of each is $1.Currently,the consumer can purchase unlimited food stamps by paying 10¢ for $1 of food.With this,the consumer purchases 500 food stamps (for 500 units of food)and 50 units of X.As a result,the government must pay 90¢ towards food,for a total cost of $450.Using a graph of budget constraints and indifference curves,show that the consumer prefers to receive a cash gift of $450 over the food stamp option.

Suppose a Consumer Purchases Food (F)and Other Goods (X)with Their