Bobby, the brain, Heenan has income of $100. He consumes food (F) and clothes (C). His utility function is UFC. The price of food and clothes is one dollar per unit. He initially consumes fifty units of each. a. Draw a graph showing his equilibrium. b. Assume that his income is $100. He receives a food stamp worth $ 50. Would he prefer $150 in money income or $100 in income and a $50 food stamp? Are they the same? Justify your answer. Provide a graph. c. Now suppose he gets a food stamp of $300. Is he indifferent between an income $100 and a food stamp of $300 as compared to a money income of $400 without food stamps? Graph your answer.
Bobby, the brain, Heenan has income of $100. He consumes food (F) and clothes (C). His utility function is UFC. The price of food and clothes is one dollar per unit. He initially consumes fifty units of each. a. Draw a graph showing his equilibrium. b. Assume that his income is $100. He receives a food stamp worth $ 50. Would he prefer $150 in money income or $100 in income and a $50 food stamp? Are they the same? Justify your answer. Provide a graph. c. Now suppose he gets a food stamp of $300. Is he indifferent between an income $100 and a food stamp of $300 as compared to a money income of $400 without food stamps? Graph your answer.
Microeconomics A Contemporary Intro
10th Edition
ISBN:9781285635101
Author:MCEACHERN
Publisher:MCEACHERN
Chapter6: Consumer Choice And Demand
Section: Chapter Questions
Problem 2QFR
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