Consider food stamps where the government gives a person $100 worth of food stamps that can only be used to buy food. When the person buys food instead of paying cash he gives an equivalent value of food stamps, e.g. if he buys $50 of food he must surrender $50 of food stamps. After his food stamps are exhausted, the person can continue to buy food but must pay cash. The person's budget line when he receives food stamps shows all the combinations of the 2 goods he can buy using his monetary income plus his food stamps together and is kinked.

Consider food stamps where the government gives a person $100 worth of food stamps that can only be used to buy food. When the person buys food instead of paying cash he gives an equivalent value of food stamps, e.g. if he buys $50 of food he must surrender $50 of food stamps. After his food stamps are exhausted, the person can continue to buy food but must pay cash. The person's budget line when he receives food stamps shows all the combinations of the 2 goods he can buy using his monetary income plus his food stamps together and is kinked.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter6: Consumer Choices

Section: Chapter Questions

Problem 4SCQ: As a college student you work at a part-time job, but your parents also send you a monthly...

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