Question
Under the federal food stamp program, low-income families receive free food stamps, which they can use only to purchase food. At its peak in 1988,
Under the federal food stamp program, low-income families receive free food stamps, which they can use only to purchase food. At its peak in 1988, more than 4.8 million eligible low-income families received free food stamps at a cost of $12.4 billion to the federal government. The important question is whether it would have been better (i.e., provided more satisfaction to a family) to have given an equal amount of subsidy in cash. Using microeconomic tools, you are asked to examine this question. (Hint: The question is whether a family, whose consumption can be divided between food and "other goods," would be better off under a cash subsidy.)
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