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Addendum to Ch 3and4 Econ 281 Fall2010_Coupons

Addendum to Ch 3and4 Econ 281 Fall2010_Coupons - Composite...

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Housing (units) Composite good, units Example:   Housing Vouchers and Subsidies Consider Housing and the composite good
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I/P h Housing (units) Composite good, units h F  =recommended level of housing h A = level of housing chosen by the        household A I h A h F
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I+S I/P h (I+S)/P h Housing (units) Composite good, units (Price $1) h h F h B Give a Cash subsidy to the Household h F   =recommended level of housing h B  =chosen level of housing, with the subsidy A B I For this Indifference Curves (IC) of consumer 1  the Subsidy entails a level of housing above the  recommended  h F  which is good!
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I+S I/P h (I+S)/P h Housing (units) Composite good, units (Price $1) h A h F Yes, BUT take consumer 2 with different IC:  what is the preference are like this? (housing  fares pretty low in consumer 2 preferences) A F I The Subsidy fails to provide  the appropriate consumption  of housing as the optimal  choice is F
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