Consider the SNAP food stamp program, where the government effectively gives recipients cash that can only be spent on food: Currently, suppose that the food stamp system gives recipients $100/month of food stamps. Suppose that the government is considering moving to a system where the recipients pay $50/month in order to participate in the food stamps program, and where the food stamps program gives the recipient $150/month of food stamps. For this example, assume that all food stamp recipients have $500/month of income. Give an example of the consumption bundle (dollars spent on food and dollars spent on the composite good) for a food stamps recipient who will not be harmed by the policy change. Give an example of the consumption bundle (dollars spent on food and dollars spent on the composite good) for a food stamps recipient who will be harmed by the policy change. Can we say how the new program will affect the food stamp recipient’s food consumption (yes or no)? If yes, will it lead to more or less food consumption?

Understanding Business
12th Edition
ISBN:9781259929434
Author:William Nickels
Publisher:William Nickels
Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment
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Consider the SNAP food stamp program, where the government effectively gives recipients cash that can only be spent on food: Currently, suppose that the food stamp system gives recipients $100/month of food stamps. Suppose that the government is considering moving to a system where the recipients pay $50/month in order to participate in the food stamps program, and where the food stamps program gives the recipient $150/month of food stamps. For this example, assume that all food stamp recipients have $500/month of income.

  1. Give an example of the consumption bundle (dollars spent on food and dollars spent on the composite good) for a food stamps recipient who will not be harmed by the policy change.
  2. Give an example of the consumption bundle (dollars spent on food and dollars spent on the composite good) for a food stamps recipient who will be harmed by the policy change. Can we say how the new program will affect the food stamp recipient’s food consumption (yes or no)? If yes, will it lead to more or less food consumption?
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