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Question: Suppose a family (with only one child) earns $50,000 per year and lives in a community with-out publicly provided education.

a. Draw the family budget constraint showing the trade-off between quantity of education for the child and all other goods.

b. Suppose now that an option of free public education worth $8,000 per student is introduced. Show how this changes the family budget constraint.

c. The family reduces its consumption of education after the introduction of free public education. Using part b, draw a set of indifference curves consistent with this outcome.

d. Now show how a school voucher redeemable for $8,000 worth of education changes the family budget constraint. What happens to the amount of education the family purchases for the child?

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M92308603

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