Question
Suppose there are two types of people in the country of Diplandia: people who value only food, and people who value both food and movie
Suppose there are two types of people in the country of Diplandia: people who value only food, and people who value both food and movie tickets. The government of Diplandia is considering moving from a cash-welfare system to a food stamps system. The new system will provide the same benefit levels, but recipients will get stamps allowing them to buy food instead of cash. Explain how this change will affect the work efforts and utility levels of the two types of people in Diplandia. How do you think the change would affect the labor supply in Diplandia economy?
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