PGP1_A(05) Microeconomics – Quiz 1 1.

If a person is eligible for food stamps, she pays $ 80 per month and thereby can obtain $150 worth of food. • If Susan’s monthly income is $250 and is not eligible for food stamps, draw her budget line taking the quantity of food on the horizontal axis and money on the vertical axis. • Draw her budget line if she is eligible for food stamps.

Show that if Susan is offered a subsidy of $70, instead of the food stamps program, she might achieve a higher level of satisfaction.

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