If a household receives a grant of $200 food stamps and cannot sell them for cash...

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If a household receives a grant of $200 food stamps and cannot sell them for cash to buy other goods, then it can consume $200 more food and the maximum amount it can spend on other goods does not change. The budget set will change in the following way in figure 2.7: $200 With food stamps Without food stamps Q3: Can you tell the difference between this food stamp grant and the lump-sum subsidy on good 1? Use a diagram to show this. If a household receives a grant of $200 food stamps and cannot sell them for cash to buy other goods, then it can consume $200 more food and the maximum amount it can spend on other goods does not change. The budget set will change in the following way in figure 2.7: $200 With food stamps Without food stamps Q3: Can you tell the difference between this food stamp grant and the lump-sum subsidy on good 1? Use a diagram to show this.

Answer rating: 100% (QA)

A A lumpsum subsidy on good 1 is a payment from the government to reduce the cost of a particular go... View the full answer