Question

1. In Question 1 of PS 1, you worked the details of the two policies that intended to help individuals in need. In particular, you presented reasons suggesting that cash transfers are always "at least as good" for their recipients as in-kind transfers, and are sometimes better. a. Explain how your reasoning and suggestion presented in Question 1 of PS 1 are based on the economist's interpretation of a consumer's welfare as preference satisfaction, and the underlying assumptions there. b. However, government policies often involve in-kind transfers: this is the case for food, housing, education, legal services, health care, and many other goods, and in-kind transfers are often much more popular than cash transfers. Can you think of possible reasons that the government chooses in-kind rather than cash transfers in such cases? Make sure that you spell out your assumptions in the process of presenting your answers.

Answer 1

a) cash transfer and also in-kind transfer both are intended for increase in welfare of the people and is done by the government. in in-kind transfer government provides direct goods and servics to the beneficiarys but in case of cash transfer government transfers money equal to the particular good or servuce to the benefuciarys account so that the person can spend acoording to there  need. cash transfer is even better than in-kind transfer because in this case the beneficiary has the freedom to buy the amount they want and the quality they want. they dont have to compromise in anything unlike in in-kind transfer where the quality of the good and amount is decided by the government.

b) government policies often involve in-kind services for goods and basic social needs because in case of cash transfer people generally divert there consumption from one thing to another. for example in villages people use the cash to have liqure and other unnecessary things rather than spending it on education and health care and this doesnot satisfy government purposes so many a time government chooses in -kind rather than cash transfers in such cases.