Suppose there are two types of people in the country of Dipolia: unskilled people who value only food and skilled, lazy people who value only alcoholic drinks. The government of Dipolia is considering moving from a cash-welfare system to a food stamps system. The new system will provide the same benefit levels, but recipients will get stamps allowing them to buy food instead of cash. Explain how this change will affect the work efforts and utility levels of the two types of people in Dipolia. How would your answer differ if unskilled people valued both food and alcoholic drinks?

  • CreatedApril 25, 2015
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