The Food Stamp Program (FSP) was officially established by the 1964 Food Stamp Act to provide adequate nutrition to low-income households-those living in poverty. It has since become one of the largest government transfer programs in 400- the United States, currently serving roughly 20 million participants at an annual cost in 2004 to the federal government of 23.8 billion dollars. That same year, program participants received an average of $83.92 in monthly Food Stamp benefits. 350- Suppose Jessica's income is $250 a month, which she spends on food and other consumption. Let the price of food and the price of other consumption each be $1 per unit. Draw her budget line. If she receives $50 in Food Stamps, how does her budget line change? 300- 250 To illustrate, first graph Jessica's budget line without Food Stamps using the line drawing tool (L,). Attach the appropriate E 200- provided label. Locate the line by finding its vertical and horizontal intercepts. 150- Now suppose Jessica's income is supplemented with $50 in Food Stamps. Suppose she spends all her cash on non-food consumption. Then Jessica consumes at the vertical intercept of her original budget line. Is it possible for Jessica to increase her non-food consumption beyond this point? Jessica, however, can use some or all of her Food Stamps to add food consumption. Ask yourself: What is the maximum amount of food that she can get with Food Stamps? The resulting consumption bundle lies on the new budget line. Starting at the point you've found, Jessica could use some of her cash to by even more food. This movement traces out the rest of her budget line with Food Stamps. 100- 50- 350 400 150 200 250 300 50 100 With this information, draw the budget line with Food Stamps using the line drawing tool. This new budget constraint will have two line segments (L2 sament 1 and L2 senment 2). Label each of them. Food per month If you are not prompted for a label, then you have used the wrong drawing tool. Non-food consumption per month

The Food Stamp Program (FSP) was officially established by the 1964 Food Stamp Act to provide adequate nutrition to low-income households-those living in poverty. It has since become one of the largest government transfer programs in 400- the United States, currently serving roughly 20 million participants at an annual cost in 2004 to the federal government of 23.8 billion dollars. That same year, program participants received an average of $83.92 in monthly Food Stamp benefits. 350- Suppose Jessica's income is $250 a month, which she spends on food and other consumption. Let the price of food and the price of other consumption each be $1 per unit. Draw her budget line. If she receives $50 in Food Stamps, how does her budget line change? 300- 250 To illustrate, first graph Jessica's budget line without Food Stamps using the line drawing tool (L,). Attach the appropriate E 200- provided label. Locate the line by finding its vertical and horizontal intercepts. 150- Now suppose Jessica's income is supplemented with $50 in Food Stamps. Suppose she spends all her cash on non-food consumption. Then Jessica consumes at the vertical intercept of her original budget line. Is it possible for Jessica to increase her non-food consumption beyond this point? Jessica, however, can use some or all of her Food Stamps to add food consumption. Ask yourself: What is the maximum amount of food that she can get with Food Stamps? The resulting consumption bundle lies on the new budget line. Starting at the point you've found, Jessica could use some of her cash to by even more food. This movement traces out the rest of her budget line with Food Stamps. 100- 50- 350 400 150 200 250 300 50 100 With this information, draw the budget line with Food Stamps using the line drawing tool. This new budget constraint will have two line segments (L2 sament 1 and L2 senment 2). Label each of them. Food per month If you are not prompted for a label, then you have used the wrong drawing tool. Non-food consumption per month

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter1: Ten Principles Of Economics

Section: Chapter Questions

Problem 7PA

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