Answer to Question #143407 in Microeconomics for roshni

Question

Ahmad has an income of $1000.He spends $100 on apples and $900 on everything else. The govt is planning to assist low income people like Ahmad. In particular , they are considering giving him either $200 in cash or giving him $200 in stamps that can only be used to buy apples.a)if apples are normal goods then ahmad will be strictly better off with $200 cash than with $200 in stamps explain

Answer 1

If apples are normal goods they have substitutes and people like Ahmad have preferences. Someone wants more apples someone wants another goods. Giving $200 cash will be better because more people can realize their needs.