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The U.S. government spends over $33 billion on its Food Stamp Program to provide millions of Americans with the means to purchase food. These stamps are redeemable for food at over 160,000 store locations throughout the nation, and they cannot be sold for cash or used to purchase nonfood items. The average food stamp benefit is about $284 per month. Suppose that, in the absence of food stamps, the average consumer must divide $600 in monthly income between food and "all other goods" such that the following budget constraint holds: $600 = $12A + $4F, where A is the quantity of "all other goods" and F is the quantity of food purchased. Using the graph below, draw the consumer's budget line in the absence of the Food Stamp Program. On the same graph, show the budget line with the Food Stamp Program.

Econometrics, Economics

  • Category:- Econometrics
  • Reference No.:- M91962059

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