Table of Contents
Scenario without policy (Initial level of demand and utility for couples, female head of households and male head of households4
Within this essay the scenario problem we will be focusing on involves the government implementing a choice of two different policies within a hypothetical economy. The government’s main target under its welfare programme is to increase consumption of entertainment but also eventually to encourage couples without children to start a family. Other objectives that the government should include is to improve the standard of living within families. The government will be using a number of policies effectively by considering a VAT increase and a subsidy for families (female head of household and male head of household). The two basket of goods that the government will be analyzing consists of Q1 (Food & Beverages) and Q2 (Entertainment). Both basket of goods are said to be consumed by three different groups of consumers such as couples, female head of households and male head of households I.E. families. The pattern of expenditure for both goods are shown within appendix 1.1. The first policy the government intends to...