Question: 2) Using the diagram below, Illustrate and briefly explain which is more efficient, a subsidy on good X or an income transfer of the same

2) Using the diagram below, Illustrate and briefly explain which is more efficient, a subsidy on good X or an income transfer of the same dollar amount, and why [5 marks) Y IIPx I'IPx X 3) Suppose I=$1[J[}, Py=$l, Px=$2 and die censumer starts in equilibrium at ea If PX decreases to $10, derive the demand curve for X based on the given budget lines and indifference curves and show it an die diagram below. Is demand for good X elastic er inelastic in the relevant price range? (5 marks] Y 100 65 60 25 45 50 100 x

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