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

Posted by dhruv on May 09, 2015; 10:55am
URL: http://discussion-forum.276.s1.nabble.com/ISI-PEB-Economics-2014-ANSWERS-1-TO-5-tp7595987p7596733.html

Lal family's budget constraint will be,

C + H = M

where, H is housing expenditure, C is other expenditure and M is income.

If government provides one-to-one subsidy on housing expenditure, that implies

C + H = M + H
Hence, C = M

For, new policy their budget constraint will be,

C + H = M + 250