Suppose the Australian Government subsidises housing expenditures of low-income families by providing a three dollar-for- dollar subsidy to a family’s housing expenditure. The Walid family qualify for this subsidy and spend a total of $1,000 per month on housing (they spend $250 of their own and receive a government subsidy of $750). Recently, a new policy has been proposed that would provide each low-income family with a lump sum transfer of $750, which can be used for housing or other goods. Using a graph, demonstrate whether the Walid family would prefer the current program, the proposed program or would be indifferent between the two. Explain your results
Suppose the Australian Government subsidises housing expenditures of low-income families by providing a three dollar-for- dollar subsidy to a family’s housing expenditure. The Walid family qualify for this subsidy and spend a total of $1,000 per month on housing (they spend $250 of their own and receive a government subsidy of $750). Recently, a new policy has been proposed that would provide each low-income family with a lump sum transfer of $750, which can be used for housing or other goods. Using a graph, demonstrate whether the Walid family would prefer the current program, the proposed program or would be indifferent between the two. Explain your results
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Suppose the Australian Government subsidises housing expenditures of low-income families by providing a three dollar-for-
dollar subsidy to a family’s housing expenditure. The Walid family qualify for this subsidy and spend a total of $1,000 per month on housing (they spend $250 of their own and receive a government subsidy of $750). Recently, a new policy has been proposed that would provide each low-income family with a lump sum transfer of $750, which can be used for housing or other goods. Using a graph, demonstrate whether the Walid family would prefer the current program, the proposed program or would be indifferent between
the two. Explain your results.
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