Consumer_choice - UBC COMM 295/FRE 295 Problem Set#2 Consumer Choice 1 The local farmer's market sells corn for $0.20 each At this price Sam buys 6

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UBC COMM 295/FRE 295 Problem Set #2 Consumer Choice 1. The local farmer's market sells corn for $0.20 each. At this price, Sam buys 6 every Thursday. Show in a diagram what would happen to Sam's consumption of corn if the market offered corn at $0.20/corn for the first 6, but $0.10/corn for each additional corn? 2. A consumer decides not to buy a VCR when her income is $18,000. However, when her income rises to $30,000, she decides to buy one. In a single diagram, draw the budget lines and indifference curves to illustrate this situation (assume the VCR costs $300 in both time periods). 3. Suppose that the government subsidizes housing expenditures of low-income families by providing a dollar-for-dollar subsidy to a family’s housing expenditure. The Cunninghams qualify for this subsidy and spend a total of $500 per month on housing: they spend $250 of their own and receive a government subsidy of $250. Recently, a new policy has been proposed that would provide each low income family with a lump sum transfer of $250
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This note was uploaded on 05/11/2011 for the course COMM 295 taught by Professor Ratna during the Winter '09 term at The University of British Columbia.

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Consumer_choice - UBC COMM 295/FRE 295 Problem Set#2 Consumer Choice 1 The local farmer's market sells corn for $0.20 each At this price Sam buys 6

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