Suppose a family with one child earns 40.000 TL per year and lives in a community...

Suppose a family with one child earns 40.000 TL per year and lives in a community without publicly provided education. The price of education per year is 1000 TL and the price of other goods is 2000 TL. Initially, the family sends the child to school 8 years.

Draw the family’s budget constraint and indifference curve and show the equilibrium point.
Suppose now that there is free public education available for 8 years. Show the change in the family’s budget constraint.
Suppose that the family decides to send the child to school 12 years, when the free public education of 8 years is introduced. Show the change in the family’s equilibrium point.
Suppose now that the government subsidizes the family worth of 8 years of education (i.e. provides income equal to 8 years of education expenditure). Show the change in the family’s budget constraint.

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Expert Solution

Rahul Sunny answered 3 months ago

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