Question

1) Suppose rambo has $60 per week to spend on food and clothing. The price of...

1)

Suppose rambo has $60 per week to spend on food and clothing. The price of food is $4 per unit, and the price of clothing is $6 per unit. Sketch rambo's budget line on the axes provided.

2)

rambo applies to the local government for food stamps and is given $40 worth of food stamps per week. On the axes, show how the receipt of food stamps affects rambo's budget line.

3)

Suppose that instead of food stamps, Rambo receives $40 in cash per week from a relative. On the axes, show how this gift affects Rambo's budget line.

4)

Add appropriate indifference curves to the diagram to show that a gift of $40 in cash could make Rambo better off than the receipt of $40 in food stamps.

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