Question

Graph and explain the following: Suppose that a family with one child has $20,000 per year...

Graph and explain the following:

Suppose that a family with one child has $20,000 per year to spend on private goods and education.

a. Suppose further that all education is privately provided. Draw this family's budget constraint.

b. Now, suppose that a free public education program is introduced to this family, where the local government will spend $4,000 per student. Draw the family's new budget constraint.

c. Now, suppose instead that the local government introduces a voucher program, giving the family $4,000 to spend on education for their child. The family can use that voucher to send their child to public school, or to help finance private school enrollment. Draw the family's new budget constraint.

d. Which option (a, b, c) will result in the largest amount of education consumption by the family? Explain why, using economic reasoning. Under what condition will (b) and (c) yield the exact same amount of education consumption by the family?

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