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Suppose the Government Spends the Same for a Particular Consumer

Question 25

Multiple Choice

Suppose the government spends the same for a particular consumer under two different policies: One subsidizes the price of good x while the other is a lump sum subsidy.Which of the following is true.


A) Compared to the lump sum subsidy, the consumer will purchase more x under the price subsidy if and only if x is a normal good.
B) Compared to the lump sum subsidy, the consumer will purchase less of x under the price subsidy if x is an inferior good.
C) Compared to the lump sum subsidy, the consumer will purchase less of x under the price subsidy if x is a Giffen good.
D) The consumer will spend the same on x under the two policy if and only if her indifference curves are kinked.
E) Both (a) and (c) .
F) Both (b) and (c) .
G) All of the above.h.None of the above.

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