Question

Your hometown allocates its budget of $600 to non-hosspitals(Y) and hospitals (X). The price of hospitals is $60 and non-hospitals $ 20. Show the impact of a conditional grant of $2 for every $1 spent on hospitals subject to a maximum of $900. Carefully draw the new budget line. Give the exact co- ordinates for all relevant points Y(non-hospitals) 28 500 213 26 24 450 22 20 18 16 14 12 10 6 4 X(Hospitals) 30 At what pbint, ate relátive pices Uhaffebted?1That Is at wtat potht is e grâht extfauste? X and What dollar amount is your hometown receiving? With the conditional grant, how much better off (in utils) is your hometown? If the grant were unconditional, how much better off would it be compared to the conditional? Give an economic explanation as to why, you are better off with unconditional grant. With the conditional grant, how many hospital facility units are being bought? With cash, how much hospital units are being bought?

Answer 1

Pre conditional grant schedule :-

Combination	Hospital	Non Hospital
A	0	30
B	1	27
C	2	24
D	3	21
E	4	18
F	5	15
G	6	12
H	7	9
I	8	6
J	9	3
K	10	0

Post conditional grant schedule :-

Combination	Hospital	Non Hospital
A	0	30
B	3	27
C	6	24
D	9	21
E	12	18
F	15	15
G	6	12
H	7	9
I	8	6
J	9	3
K	10	0

B 16 14 Maspilal

1) The Grant is exhausted at 6 units of X and 12 units of Y at combination G .

2) what dollar amount is your hometown receiving?

The hometown is getting twice the amount of Grant for every $1 spent on the hospital services. There is a ceiling of dollar 900 thus the residents of the hometown are purchasing Hospital services for Dollar 300 and a receiving conditional grants for 600.

3) how much is the person better of in utils after receiving the conditional brand?

According to the utility curve provided in the above question we see that initially the person was receiving a benefit of 300 utils which has now changed to 500 utils point does the person has become better off with an extra 200 utils.

4) if the grant was unconditional How Much Better Off would it have been in comparison to conditional grant?

if the grant was unconditional and the person chose to buy only hospitals services with their budget of dollar 600, they would have received twice the amount of money spent on Hospital services that is Dollar 1200 amount of grants . now with this amount the the resident would have been able to purchase 20 units of extra Hospital services in comparison to the present scenario of 10 hospital services using conditional grants.

5) with the conditional grant how many Hospital facility are being bought

With the help of conditional grants 10 units of hospital services are being bought.

6) with cash how much Hospital units are being bought?

With the use of cash five units of hospital services are being bought .