ISI PEB (Economics), 2014 ANSWERS 1 TO 5..

C + 1/2*H = 250

For example, if Lal had earlier spent 100 on H then we was left with 150 to spent on C. But in the new budget if he spend 100 on H, he is left with 200. Out of this 200, 150 is again spent on C, but still he can spend 100 more on H. which is 1 to 1 subsidy

Acc to you if budget line is parallel to x axis, it means he can spend any amount on H making C as a constant.

[dhruv]

There was a similar question in Varian workbook, in Ch. 5, where for every dollar spend on computers the school got 50 cents. In one-to-one subsidy don't you think that for every rupee Lal spend he will get a rupee back or I am misinterpreting?

If I am right don't you think, my budget constraint is correct?

[onionknight]

I think your solution is correct.