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1. A household has utility mction U(F,C) = F2 C 1' 2, where F is food and C is a composite of all other goods.

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1. A household has utility mction U(F,C) = F\"2 C 1' 2, where F is food and C is a composite of all other goods. Prices of F and C are both $1 and the household's income is $100. (a) How much F and C will the household buy? (You do not need to derive the demand functions.) (b) Now suppose government wants to try to triple the household's income by giving it an in-kind subsidy of 200 units of food, which cannot be re-sold. Draw a diagram showing the household's budget constraint now, in relation to its budget constraint and choice om part (a). How much F and C will the household buy now? (c) Show graphically and then calculate a dollar measure of how much better off the household is as a result of this subsidy. State clearly what measure you have used

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