1

, = + 100
=
= + 100

! ( )

(, ) =
=
+ 100
= = + 100 (1st equation)

+ = (2nd equation)

=
= 100

=
100

2 =
100

=
!

!
+ =
=
= 100
= + 100

=
+ 100

2 =
+ 100

=
+
!

2
! , ,
! .

3
= $2
= $5
= $400

=
50
2

400
=
50
22
= ( )

+ 50
2

400
2
=
+ 50
25
5
= ( )

Sallys level of utility from this consumption basket
, = + 100
= 5060 + 10060
= 3000 + 6000
=

4
= $2
= $5
= 400

= $1.6
= $5

=
50
2
400
=
50
21.6
= 75

= 1.6 + 5
400 = 1.675 + 5
= 56

, = 7556 + 10056
= 4200 + 5600
= 9800

Policy 2
Food voucher =
, = 9800
= $2
= $5
= 400 +

1.6

, =
=

5
+ 100
= 5 = 1.6 + 160
1.6 160
=
+
( 1)
5
5

= 400 +
2 + 5 = 400 + 2

=

1.6 160
+
= 400 +
5
5
2 + 1.6 + 160 = 400 +
3.6 240 =
! 1
1, = 75
= 56
3.6 75 240 =
270 240 =
=
($
! )


Question 5
Policy 2 will cost least money to the government, because if the government
choose policy 1 and the people choose to buy more petrol than 75 liter,
government would be cost more money that if he would have given $30 food
voucher.







2 + 5