Since 1979, low-income recipients have been given food stamps without charge. However before 1979, people bought food
Question:
Since 1979, low-income recipients have been given food stamps without charge. However before 1979, people bought food stamps at a subsidized rate. For example, to get $1 worth of food stamps, a household paid about 20¢ (the exact amount varied by household characteristics and other factors). Show the budget constraint facing an individual if that individual is allowed to buy up to $100 per month in food stamps at 20¢ per each $1 coupon. Compare this constraint to the original budget constraint (original income is Y) with no assistance and the budget constraint if the individual receives $100 of food stamps for free?
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