The Price Effects of Vouchers and Recipient Welfare: Using Figure 2 as a starting point (v is the voucher point and j is the public-housing point), suppose the $300 program increases the price of housing, from $1 to $1.50 per unit of housing. Complete the graph with all the missing numbers. 

a) Draw the voucher budget line with a housing price of $1.50.

b) For a household that chooses 300 units of housing service, its spending on all other goods is __________, computed as...

c) The slope of the budget line is ________ per unit of housing, compared to __________ if vouchers don’t affect housing prices.

d) Given the price effects of a voucher program, the typical recipient would be [better, worse] off with public housing because...

e) Vouchers will be better if the price elasticity of the supply of housing is a [large, small] number.

f) Subsidized public housing will be better if the price elasticity of the supply of housing is a [large, small] number.

 

FIGURE 15-4 Utility Maximization with Housing Voucher All other goods ($) 800 700 560 500 300 400 540 U U Budget line with $300 voucher Initial budget line 800 Quantity of housing service A $300 voucher shifts the budget line to the right by $300 and the recipient chooses point v, with 400 units of housing service and $700 of other goods. The voucher generates higher utility than public housing because the voucher gives the recipient more options.