Question
Suppose John Snow has a monthly income of $1,200 which he can spend on the purchase of swords (e) and/or armor (a). How would his
Suppose John Snow has a monthly income of $1,200 which he can spend on the purchase of swords (e) and/or armor (a). How would his budget constraint look if the prices of the goods are Pe = $24 per sword and Pa = $60 per armor? What is the slope of this budget constraint? This excercise already done by a tutor. I have stated the exercise for a better understanding of the next one. |
Considering the data from the previous exercise, suppose that Lord Commander wants to apply stimulus measures to improve the equipment of the soldiers, and is therefore considering three possibilities: (a) Grant a subsidy of $300 monetary units to all citizens. b) Subsidize the consumption of armor with $10 monetary units per armor obtained. c) Grant each citizen 10 coupons that will allow them to obtain one free armor per coupon (these coupons can NOT be exchanged for money in the market).
You must develop all the possibilities and conclude which one is the best to achieve the Lord Commander's objective.
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