Comparing the original budget line with the budget line for an excise subsidy and a cash grant:
A)the budget line for a cash grant shifts such that it is tangent to the same indifference curve so that the well-being of the consumer is the same.
B)the slope of the budget line for a cash grant is positive.
C)the budget line for a cash grant is parallel to the original budget line.
D)the budget line for an excise subsidy shifts such that it is tangent to the same indifference curve so that the well-being of the consumer is the same.

Question

Quizplus · Accepted Answer

The budget line for a cash grant is parallel to the original budget line because a cash grant increases the consumer's income without changing the relative prices of goods, thus shifting the budget line outward while maintaining the same slope.

Comparing the Original Budget Line with the Budget Line for an Excise