The Brady family have a weekly budget of €200 to be spent on Food (F) and Other Goods (OG), which are initially equally priced at €10 and €20 per unit, respectively. Given recent inflation, the government has concerns about the ability of large families to afford an adequate diet for children. Due to this, the government announces that when Food consumption exceeds 12 units, the government will subsidise food consumption so that the price per subsequent unit will be €5 for any family. With Food on the horizontal axis, show the family’s pre and post-scheme budget line. Can we definitively determine the family’s utility maximising consumption bundle as a result of the government scheme?

Answer rating: 100% (QA)

The government is concerned about the ability of families with multiple children to afford a diet that is adequate for their children As a consequence ... View the full answer