Suppose that under a rent subsidy the government will pay some specified proportion of the total...

 

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Suppose that under a rent subsidy the government will pay some specified proportion of the total rental price. Using an indifference map for "housing" (e.g. rooms of standard quality) and "all other commodities" analyze whether this approach to enhancing domestic welfare is more or less effective than granting income tax reductions equal in dollar amount to the amount of the rent subsidy? How do these compare to a lump sum $250 per month subsidy which must be applied toward rent or it is taken away? Suppose that under a rent subsidy the government will pay some specified proportion of the total rental price. Using an indifference map for "housing" (e.g. rooms of standard quality) and "all other commodities" analyze whether this approach to enhancing domestic welfare is more or less effective than granting income tax reductions equal in dollar amount to the amount of the rent subsidy? How do these compare to a lump sum $250 per month subsidy which must be applied toward rent or it is taken away?

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To analyze the effectiveness of different approaches to enhancing domestic welfare in the context of housing subsidies lets compare three scenarios 1 ... View the full answer