You run a foundation that provides help to families during the holiday season. You distribute both clothing and food, which you buy (at discounted prices) with money from donors. Clothing costs you $1 per pound and food costs $4 per crate. 1a) With a budget of $1,000, draw your budget constraint on the graph below (labeling the intercepts) and illustrate a hypothetical utility-maximizing choice with an indifference curve, labeling the resulting choice of clothing and food as simply C* and F*. 1b) This year, you are happy to learn that the city is providing a match for money spent on food, so that you will need to spend only half as much per crate you provide. How is this likely to change the quantities of food and clothing you provide? Explain.
You run a foundation that provides help to families during the holiday season. You distribute both clothing and food, which you buy (at discounted prices) with money from donors. Clothing costs you $1 per pound and food costs $4 per crate.
1a) With a budget of $1,000, draw your budget constraint on the graph below (labeling the intercepts) and illustrate a hypothetical utility-maximizing choice with an indifference curve, labeling the resulting choice of clothing and food as simply C* and F*.
1b) This year, you are happy to learn that the city is providing a match for money spent on food, so that you will need to spend only half as much per crate you provide. How is this likely to change the quantities of food and clothing you provide? Explain.
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