Suppose the Government Decides to Help Poor Families with Kids

Multiple Choice

Suppose the government decides to help poor families with kids by subsidizing the purchase of milk. The subsidy takes the form of a 50% discount on the price of milk. Suppose also that poor families buy only milk and soda, which are substitutes, although not perfect substitutes. What happens to the amount of milk poor families buy?

A) It increases.
B) It decreases.
C) It stays the same.
D) It depends on the shape of the family's indifference curve.