Question

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.

Answer 1