Question
Suppose that the government subsidizes housing expenditures of low-income families by providing a dollar-for-dollar subsidy to a family's housing expenditure. The Smiths qualify for this
Suppose that the government subsidizes housing expenditures of low-income families by providing a dollar-for-dollar subsidy to a family's housing expenditure. The Smiths qualify for this subsidy and spend a total of $500 per month on housing: they spend $250 of their own and receive a government subsidy of $250. Recently, a new policy has been proposed that would provide each low-income family with a lump sum transfer of $250, which can be used for housing or other goods. Using a graph, demonstrate whether the Smiths would prefer the current program, the proposed program, or would be indifferent between the two.
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