Samson can choose between two goods: consumption this week, and consumption next week. His income is £200 this week and their income next week is £200. He can just put this week's money under their mattress for the future. Alternatively, he can borrow £190 and pay back £200 next week. Show Samson's budget set in a suitably labelled graph. The government bans all payday loans. Show the effect on Samson's budget set. Assume that Samson was a borrower before the change. Would this policy make him better or worse off (i.e. happier.) Explain.

Samson can choose between two goods: consumption this week, and consumption next week. His income is £200 this week and their income next week is £200. He can just put this week's money under their mattress for the future. Alternatively, he can borrow £190 and pay back £200 next week. Show Samson's budget set in a suitably labelled graph. The government bans all payday loans. Show the effect on Samson's budget set. Assume that Samson was a borrower before the change. Would this policy make him better or worse off (i.e. happier.) Explain.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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