Question 3

Suppose m = $300, The price of food is Pf = $3 and the price of "other goods" is Pg = $1.

(a) What is the budget constraint? Draw the budget line on a graph and identify points on each axis. Put food on the x axis.

(b) Suppose there is a quantity of 30 food stamps issued. Draw the new budget line and show points on each axis. Put food on the x axis.