Consider food stamps where the government gives a person $100 worth of food stamps that can only be used to buy food. When the person buys food instead of paying cash he gives an equivalent value of food stamps, e.g. if he buys $50 of food he must surrender $50 of food stamps. After his food stamps are exhausted, the person can continue to buy food but must pay cash. The person's budget line when he receives food stamps shows all the combinations of the 2 goods he can buy using his monetary income plus his food stamps together and is kinked. All Other Goods A D Food O The blue budget line shows before getting food stamps. The red budget line shows after getting food stamps. The green budget line shows after getting food stamps. O At poing B, the person is using all his food stamps and none of his cash to buy food. O At point A, the person is using all of his food stamps and none of his cash to buy food. B.

Consider food stamps where the government gives a person $100 worth of food stamps that can only be used to buy food. When the person buys food instead of paying cash he gives an equivalent value of food stamps, e.g. if he buys $50 of food he must surrender $50 of food stamps. After his food stamps are exhausted, the person can continue to buy food but must pay cash. The person's budget line when he receives food stamps shows all the combinations of the 2 goods he can buy using his monetary income plus his food stamps together and is kinked. All Other Goods A D Food O The blue budget line shows before getting food stamps. The red budget line shows after getting food stamps. The green budget line shows after getting food stamps. O At poing B, the person is using all his food stamps and none of his cash to buy food. O At point A, the person is using all of his food stamps and none of his cash to buy food. B.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter4: Utility Maximization And Choice

Section: Chapter Questions

Problem 4.2P

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