A poor family chooses between hours of child care per day, Q, and all other goods per day. At the initial budget line, L¹, the family chooses Bundle e, on indifference curve 1¹, where the family consumes Q₁ hours of child-care services. With a child-care price subsidy, the new budget line is L². The family consumes Bundle e₂ on 12, where it uses more hours of child care, Q₂. How could the government set a lump-sum subsidy that would make poor parents as well off as the hourly subsidy yet cost less? 1.) Use the line drawing tool to draw a new budget contraint that corresponds to a lump-sum subsidy that contains enough money for the poor family to move to indifference curve 12. Label this line 'L³.. 2.) Use the point drawing tool to identify how many hours of child care and all other goods the poor family consumes with the lump-sum subsidy. Label this point 'e'. Carefully follow the instructions above and only draw the required objects. Given the tastes shown in the figure, what would be the effect on the number of hours of child-care service that these parents buy? Compared to the hourly price subsidy, the poor family consumes child care with the lump-sum subsidy. hours of All other goods per day goods per day - Q₁ Q₂ Q. Hours of day care per day of 82 Augu 02 Q 5
A poor family chooses between hours of child care per day, Q, and all other goods per day. At the initial budget line, L¹, the family chooses Bundle e, on indifference curve 1¹, where the family consumes Q₁ hours of child-care services. With a child-care price subsidy, the new budget line is L². The family consumes Bundle e₂ on 12, where it uses more hours of child care, Q₂. How could the government set a lump-sum subsidy that would make poor parents as well off as the hourly subsidy yet cost less? 1.) Use the line drawing tool to draw a new budget contraint that corresponds to a lump-sum subsidy that contains enough money for the poor family to move to indifference curve 12. Label this line 'L³.. 2.) Use the point drawing tool to identify how many hours of child care and all other goods the poor family consumes with the lump-sum subsidy. Label this point 'e'. Carefully follow the instructions above and only draw the required objects. Given the tastes shown in the figure, what would be the effect on the number of hours of child-care service that these parents buy? Compared to the hourly price subsidy, the poor family consumes child care with the lump-sum subsidy. hours of All other goods per day goods per day - Q₁ Q₂ Q. Hours of day care per day of 82 Augu 02 Q 5
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
Ab 42
Economics
Transcribed Image Text:All other goods per day
-тот сот
Y3
83
82
Q1 аз аг
Q. Hours of day care per day
N
12
Q
Transcribed Image Text:A poor family chooses between hours of child care per day, Q, and all other goods
per day. At the initial budget line, L¹, the family chooses Bundle e, on
indifference curve 1¹, where the family consumes Q₁ hours of child-care services.
With a child-care price subsidy, the new budget line is L2. The family consumes
Bundle e₂ on 1², where it uses more hours of child care, Q₂.
How could the government set a lump-sum subsidy that would make poor parents
as well off as the hourly subsidy yet cost less?
1.) Use the line drawing tool to draw a new budget contraint that corresponds to a
lump-sum subsidy that contains enough money for the poor family to move to
indifference curve 1². Label this line 'L³¹.
2.) Use the point drawing tool to identify how many hours of child care and all other
goods the poor family consumes with the lump-sum subsidy. Label this point 'e'.
Carefully follow the instructions above and only draw the required objects.
Given the tastes shown in the figure, what would be the effect on the number of
hours of child-care service that these parents buy?
Compared to the hourly price subsidy, the poor family consumes
child care with the lump-sum subsidy.
hours of
All other goods per day
TUT
goods per day
>>
Y3
82
Q₂
Q₁
Q. Hours of day care per day
83
€2
./1
Q
Q
5
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