Question
Quantity tax and Food Stamps (a)Consider a two-good (X and Y) model. How does a quantity tax (i.e. per unit tax) on good X affect
Quantity tax and Food Stamps
(a)Consider a two-good (X and Y) model. How does aquantity tax(i.e. per unit tax) ongood Xaffect thebudget line of a consumer?
(b)A country recently passed a food stamp legislation. Qualified households are given food stamps, which can be used to purchase foods, but they cannot legally re-sell them. Suppose a household receives a grant of $300 of food stamps per month. How will this household's budget line be affected? (Hint: Consider two goods: food and other goods.)
Hi, I am really struggling with question B. I have found a previous answer to this question however, I am confused as to why the budget line in there answer is kinked.
Thank you.
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