In the country of Bolivia, bread costs 3bs (bolivianos) per loaf and milk costs 4bs per gallon.The government has decided to attack poverty by guaranteeing 8 loafs of bread and 3 gallons of milk per person per week. Only individuals that cannot afford this bundle qualify.
1. Obtain the range of income levels for individuals that qualify for the program.
2. Assume that the government gives out 8 loafs of bread and 3 gallons of milk to all qualifying individuals. Also, assume that people cannot trade the goods they receive from the government.Graph the new budget set for a qualifying individual of your choice.
3. Is it possible that some people end up asking for a salary reduction?
4. Graph the budget set you chose in part 1 but now assume that there is a black market for government provided bread and milk (same prices as before).
5. Determine a cheaper way for the government to implement the guarantee. Graph the new budget set for the individual of part (2).