Suppose You Are a Government Analyst,and You Want to Help

question 70

Multiple Choice

Suppose you are a government analyst,and you want to help homeless families.To do so,you have decided to subsidize rental housing for poor families.(A subsidy is a payment by the government that pays part of the price of a specific product.For example,the government pays part of the rent payment. ) If families had been choosing rationally before the subsidy,what is most likely to happen as a result of the subsidy?

• A)The substitution effect will cause people to consume less rental housing as the price of housing falls.
• B)The income effect will cause people to consume less rental housing,but only if rental housing is a normal or luxury good.
• C)People will consume more housing and more of another good,for example,groceries.
• D)Any rational person will respond by consuming more housing,and no more of the other goods he or she consumes.

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Definitions:

Alkene

Unsaturated hydrocarbons containing at least one carbon-carbon double bond, participating in various chemical reactions.

Poly(Tetrafluoroethylene)

A synthetic polymer known for its exceptional chemical resistance and used in non-stick coatings, commonly called Teflon.

Teflon

A synthetic fluoropolymer of tetrafluoroethylene known for its non-stick properties and used in a wide variety of applications, including cookware coatings.

(Z)-4-Bromo-3-Heptene

A type of alkene with a bromo substituent positioned on the fourth carbon atom in a Z (cis) configuration relative to a double bond.