Question

Prior to 1979, the food stamp program required families to pay a certain amount for food stamps. Suppose a family can receive $150 in food stamps for a payment of 50; no other options are offered. How would this policy affect the budget line? Compared with an outright gift of $100 in food stamps, which is the way the program now works, would this policy lead to more, less or the same food compensation?

Was trying to get the breakdown for this problem as far how you got the answer.

Answer 1

suppose that the family has just $150 and can buy $100 worth other items and $50 worth food stamps which will give him/her food worth $150. so, the budhet line would be this kinked line

and suppose the prices for all is $1. thus, with food stamps of 150 he would attain a max of 75 units of food and other items each i.e point B inthe diagram

with $100 food stamps he would have the opportunity to buy more of other items which is beyond $100 extending to $150 i.e. point C in the diagram