2. The mayor of San Francisco wants to promote classical music appreciation by young people and therefore gives every 5th grader a voucher for one concert, including all transportation costs. Draw the students budget set, assuming the voucher has some value v, on a space of two possible goods: classical music and all other goods. (Remember, the units here will be one dollar spent on classical music vs. one dollar spent on something else). The voucher cannot be traded or sold for cash. Assume both are goods, in the sense that more is better.

(a) Alex is a fifth grader who has five dollars to spend. What does his budget set look like before and after the voucher?

(b) Alex would have spent 4 dollars on classical music if he had not received the voucher. Assuming he has ordinary preferences, draw a set of indifference curves that indicate this as his choice point and label it A. Shade in the portion of the available goods space, after the voucher, which makes Alex better off. Do you know whether Alex will definitely consume more classical music?

(c) Another 5th grader, Max, also has five dollars to spend. Max has ordinary preferences and would have spent 0 dollars on classical music, if he had not received the voucher. On a new graph, draw a set of indifference curves that would indicate this as his choice point, and label that point M. Like in b), shade in the area of the available goods space that makes Max better off. Do you know whether Max will definitely consume more classical music?

(d) Which type of person is more likely to increase consumption after being given a voucher: those who already consumed a lot of the good before the voucher or those who consumed little prior to the voucher?