Advanced Engineering Mathematics
10th Edition
ISBN: 9780470458365
Author: Erwin Kreyszig
Publisher: Wiley, John & Sons, Incorporated
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1. Suppose an individual receives a $100 monthly cash gift and another individual receives $100
worth of in-kind transfers in the form of housing vouchers. Using indifference curves and budget constraint diagrams, analyze the effect for both individuals when the price of housing increases by 10%. Determine the change in their consumption of housing and other goods and explain how these effects differ between cash gifts and in-kind transfers. Explain.
Consider 2 scenarios:
(1) prior to and after the price increase, both consume more than the allotted gift on housing
(2) prior to the price increase, both consume exactly the amount of the allotted gift.
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