Write your answer on a piece of paper and scan it to a single .pdf document (jpeg OK, but pdf preferred) and upload. Please do not upload multiple separate documents for this question. Consider the consumer choice model from lecture with quantity of housing on the horizontal axis and quantity of consumption on the vertical axis. Let the price of a unit of consumption be $1, as we assumed during the course. Assume also that the consumer has standard preferences ("normal" looking indifference curves) and that housing is a normal good. Maintain these assumptions throughout the questions that follow. a. (2.5 points) Draw a diagram illustrating the effect of a cash transfer on the consumption choice of a consumer. Clearly denote the "before" and "after" choices of the consumer and the before and after budget constraints. b. (2.5 points) Using a new diagram, illustrate the effect of a non-transferrable (i.e, you can't trade it for cash) housing voucher on the consumption choice of a consumer. Draw the case where the consumer is less well off with the voucher than with a cost-equivalent cash transfer. Clearly denote the "before" and "after" choices of the consumer and the before and after budget constraints. C. (2.5 points) Using a new diagram, illustrate the effect of government provided free housing on the consumption choice of a consumer. Draw the case where the consumer doesn't change their consumption of housing in response to the offer of free housing. Clearly denote the "before" and "after" choices of the consumer and the before and after budget constraints. d. (2.5 points) Using a new diagram, illustrate the point that a cash transfer can give a greater utility boost to a consumer than an equivalent-cost subsidy. Clearly denote the cost difference between the two policies in your diagram. Write your answer on a piece of paper and scan it to a single .pdf document (jpeg OK, but pdf preferred) and upload. Please do not upload multiple separate documents for this question. Consider the consumer choice model from lecture with quantity of housing on the horizontal axis and quantity of consumption on the vertical axis. Let the price of a unit of consumption be $1, as we assumed during the course. Assume also that the consumer has standard preferences ("normal" looking indifference curves) and that housing is a normal good. Maintain these assumptions throughout the questions that follow. a. (2.5 points) Draw a diagram illustrating the effect of a cash transfer on the consumption choice of a consumer. Clearly denote the "before" and "after" choices of the consumer and the before and after budget constraints. b. (2.5 points) Using a new diagram, illustrate the effect of a non-transferrable (i.e, you can't trade it for cash) housing voucher on the consumption choice of a consumer. Draw the case where the consumer is less well off with the voucher than with a cost-equivalent cash transfer. Clearly denote the "before" and "after" choices of the consumer and the before and after budget constraints. C. (2.5 points) Using a new diagram, illustrate the effect of government provided free housing on the consumption choice of a consumer. Draw the case where the consumer doesn't change their consumption of housing in response to the offer of free housing. Clearly denote the "before" and "after" choices of the consumer and the before and after budget constraints. d. (2.5 points) Using a new diagram, illustrate the point that a cash transfer can give a greater utility boost to a consumer than an equivalent-cost subsidy. Clearly denote the cost difference between the two policies in your diagram
