Suppose ment decides to promote the consumption of broccoll in the community. The goal is to ensure that each resident eats at least 3 pounds of broccoli per week. Consider only a single representative consumer, who purchases some broccoli at market prices and would purchase 3 pounds of broccoli if either the price were low enough or income were high enough. Assume broccoli is a good, characterized by the usual smooth, convex indifference curves. Assume further that whatever the government does has no effect on the market price for broccoli (this is a small community). The proposals are: I.) Broccoli subsidies. The consumer is to be given discount coupons good only for the purchase of broccoli. The discounted price is set so that the consumer will purchase 3 pounds. II.) Direct cash payments, which can be used to purchase anything. The cash is enough to raise the consumer's income to the point where he will buy 3 pounds of broccoli. III.) Public broccoli distribution. The government will give away three pounds of broccoli to each consumer. Resale is prohibited. a. Draw and explain the income and substitution effects of each of the three plans, and their effects on broccoli consumption.

Suppose ment decides to promote the consumption of broccoll in the community. The goal is to ensure that each resident eats at least 3 pounds of broccoli per week. Consider only a single representative consumer, who purchases some broccoli at market prices and would purchase 3 pounds of broccoli if either the price were low enough or income were high enough. Assume broccoli is a good, characterized by the usual smooth, convex indifference curves. Assume further that whatever the government does has no effect on the market price for broccoli (this is a small community). The proposals are: I.) Broccoli subsidies. The consumer is to be given discount coupons good only for the purchase of broccoli. The discounted price is set so that the consumer will purchase 3 pounds. II.) Direct cash payments, which can be used to purchase anything. The cash is enough to raise the consumer's income to the point where he will buy 3 pounds of broccoli. III.) Public broccoli distribution. The government will give away three pounds of broccoli to each consumer. Resale is prohibited. a. Draw and explain the income and substitution effects of each of the three plans, and their effects on broccoli consumption.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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