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B. Assume a family with small children from Minnesota also has $350 to spend and faces the same initial prices as the Kansas family (Pchildcare

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B. Assume a family with small children from Minnesota also has $350 to spend and faces the same initial prices as the Kansas family (Pchildcare = $10, PAOG = $1.) On a different graph draw the budget constraints for this family with and without the lump-sum childcare voucher. Use indifference curves to show that a recipient of this childcare subsidy will likely increase their spending on all other goods, depending on their tastes, as well as on childcare. You should assume that the family's indifference curves exhibit declining marginal rates of substitution for childcare vs. all other goods (i.e. they are convex .). C. For the Kansas family, add indifference curves to show their optimal bundles of childcare and all other goods with and without the subsidy. To answer this you will again assume the family's indifference curves are convex and, thus, exhibit dedining marginal rates of substitution for childcare vs. all other goods. D. Show that the Kansas family would prefer a lump sum childcare voucher instead of the hourly subsidy even if the voucher has exactly the same value as the amount they received from the hourly subsidy program (this point is important that is why it is underlined !). Show also that the childcare industry would instead prefer the hourly subsidy program instead of the lump sum voucher

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