Smith is given a voucher that can be spent only on textbooks. Smith has a budget constraint with textbooks on the horizontal axis and everything else on the vertical axis. Suppose everything else is comprised only of normal goods. Then:
A) the voucher will result in Smith increasing his spending on textbooks by more than the amount of the voucher
B) Smith will most likely end up spending some more money on everything else after receiving the voucher
C) Smith will not buy any textbooks because he can use the voucher for all other goods
D) Smith will most likely end up spending less money on everything else after receiving the voucher

Question

Quizplus · Accepted Answer

The Answer of Smith is given a voucher that can be spent only on textbooks. Smith has a budget constraint with textbooks on the horizontal axis and everything else on the vertical axis. Suppose everything else is comprised only of normal goods. Then:
A) the voucher will result in Smith increasing his spending on textbooks by more than the amount of the voucher
B) Smith will most likely end up spending some more money on everything else after receiving the voucher
C) Smith will not buy any textbooks because he can use the voucher for all other goods
D) Smith will most likely end up spending less money on everything else after receiving the voucher

Smith Is Given a Voucher That Can Be Spent Only