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Micro economics

  • 20-11-2007 2:59pm
    #1
    Chuckie07
    Closed Accounts Posts: 4 ✭


    Just wondering does anyone have any idea how to solve this iv been at it for three days now and im goin insane:eek:........ any guidelines would be appreciated!;)


    Suppose the government has decided to transfer income into a particular person. Draw a graph and compare implications of a program that subsidzes the consumption of some good-food, eg) with the implications of a lump sum transfer of cash??


Comments

  • #2
    leninbenjamin
    Closed Accounts Posts: 8,983 ✭✭✭leninbenjamin


    i should know this...

    a simplistic answer: solution is in the budget line. the cash will cause it to increase on both axis, whereas the subsidy for one good will only have an effect on one axis. the cash will result in a greater utility, but potentially in greater consumption of a less favourable good.... like beer...

    i want beer....

    if i'm wrong then i've just wasted 2 and a half years of my life...


  • #3
    Chuckie07
    Closed Accounts Posts: 4 ✭Chuckie07


    Thanks a million, that helped me understand it readin the book was no help!
    cheers!!!:)


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