3.7 Federal housing choice vouchers ($19 billion in 2015)

and food stamps ($74 billion in 2014) are two of the largest in-kind transfer programs for the poor. Many poor people are eligible for both programs: 30% of housing assistance recipients also used food stamps, and 38% of food stamp participants also received housing assistance (Harkness and Newman, 2003).

Suppose Jill’s income is $500 a month, which she spends on food and housing. The prices of food and housing are each $1 per unit. Draw her budget line. If she receives $100 in food stamps and $200 in a housing subsidy (which she can spend only on housing), how do her budget line and opportunity set change?