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Jane's parents are considering setting up a trust fund; essentially money Jane would receive on her 18th birthday. Jane's parents are considering two options. The first is to set up a restricted education trust fund whereby money will be provided to Jane to cover 4 years of college education but only if it is used exclusively for her college education. The second option is an unrestricted trust whereby Jane could, upon turn 18, use the money on education, if she wanted to, or on any other goods she'd choose to buy. a. First, use indifference curves and budget constraint analysis to illustrate the preference conditions whereby Jane would be better off with the unrestricted trust fund rather than the restricted trust fund. Will she buy more or less than 4 years of college? Explain. b. Second, use indifference curves and budget constraint analysis to illustrate the preference conditions whereby Jane would be just as well off with either the restricted or unrestricted trust fund. Will she buy more or less than 4 years of college? Explain.

Business Economics, Economics

  • Category:- Business Economics
  • Reference No.:- M92002179

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