Question

Federal housing choice vouchers​ ($19 billion in​ 2015) and food stamps​ ($74 billion in​ 2014) are two of the largest​ in-kind transfer programs for the poor. Many poor people are eligible for both​ programs: 30% of housing assistance recipients also used food​ stamps, and​ 38% of food stamp participants also received housing assistance​ (Harkness and​ Newman, 2003). Suppose​ Jill's income is​ $500 a​ month, which she spends on food and housing. The price of food and of housing is each​ $1 per unit. Draw her budget line. If she receives ​$150 in food stamps and ​$50 in a housing subsidy​ (which she can only spend on​ housing), how do her budget line and opportunity set​ change? ​1.) Use the line drawing tool to draw​ Jill's budget line without food stamps and federal housing support. Label this line ​'L1. ​

2.) Using the multipoint curved line drawing tool to draw​ Jill's budget line with ​$150 in food stamps and a ​$50 housing subsidy. Label this line ​'L2. Carefully follow the instructions​ above, and only draw the required objects. 

*Please answer question 1 and 2 as stated in this post. Thank You !!

Answer 1

Given data:

federal housing choice vouchers = $19 billions in 2015

food stamps = $74 billion in 2014

the % of food stamp participants also received housing assistance = 38%

the % of housing assistance recipients also used food stamps = 30 %

The initial budget line and the budget line with the subsidies is provided below with explanations.

I have provided extra labelling for explanation purpose.

The initial budget line without any subsidy is given by line CE.

The budget line only with food subsidy will be the line ABC.

The budget line only with housing subsidy is line DBFE.

Therefore, the area BCG is not included in budget line with food subsidy as the amount has to be used only for food.

Similarly, the area AEF is not included in budget line with housing subsidy since the amount has to be used only for housing.

A combination of these gives the budget line with food and housing subsidies.