eco204_HW_3 - 1 s ECO20420082009 AjazHussain HW3 Question1...

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1 ECO 204, 2008 2009. Ajaz Hussain. Department of Economics, University of Toronto s ECO 204 2008 2009 Ajaz Hussain HW 3 Question 1 In lecture 3, we analyzed the effects of a public policy program that gave free education for exactly 12 years of education. Figure 1 depicts the private budget line and public budget point from that question: Figure 1 In this question, you will analyze two variations of that question: (a) “coupons” that can only be used for education (exactly like gift certificates that can be spent only a certain store) and (b) a cash subsidy. Assume consumer has “imperfect substitutes” preferences over education and everything else, which are each good goods.
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2 ECO 204, 2008 2009. Ajaz Hussain. Department of Economics, University of Toronto Note : You may want to read BB p. 114 118 after you attempt this question ‐‐ in their version of this question ‐‐ for housing instead of education ‐‐ they look at the case of someone who consumes less than a “mandated” level of housing.
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