Question
Household preferences Using data from household surveys, you have determined that the 'typical' household's preferences are represented by the utility function, U= (x+ 24) y
Household preferences
Using data from household surveys, you have determined that the 'typical' household's
preferences are represented by the utility function,
U= (x+ 24)
y ,where x represents the quantity of fruit and vegetables consumed, and y represents the quantity of the composite good consumed. The associate marginal utilities are,
MUx=y and MUy=x+ 24
The price of fruit and vegetables is Px= $10 per kg, and the price of the composite good is normalised to Py= 1.
Suppose that, instead of transfers, the government decides to use vouchers re-deemable for fruit and vegetables. What value of voucher would the government need in order to achieve the 5kg consumption target? Hint: Your answer will be a function of the household's income.
You should assume that vouchers cannot have a negative value.
Pls draw the demand graph, I need to know where Budget line and the Income curve intercept on the optimization point.
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