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Assume that housing and food are the only goods available. A family's budget is $800 à...

Assume that housing and food are the only goods available. A family's budget is $800 à month. Assume the price of food is equal to $4 and the price of housing is equal to $5 . Draw the budget constraint for this family
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The housing and food are the only goods available. A family’s budget is $800 a month. Assume the price of food is equal to $4 and the price of housing is equal to $5. The budget constraint is written as M=PxX+PyY. Then we have 800=4F+5H, where F denotes amount of Food and H denotes house.

We have drawn the shift in budget constraint in the following figure.

Now suppose a grant of $1200 is given to the consumer without any restriction on the spending. Then the bugte line shift parallely for MM to M'M'. It will be 2000=4F+5H.

If the family is given public housing worth $1200 a month and prices and other income are the same as before then the budget line will shift like in the right side of the figure from MM to M'M'. He can spend this additional amount only for houseing, so it shift this budget line keeping food consumption point same.

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