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QUESTION

The two questions are in the description, the questions should be anwered with graph

3.) Consider food stamps.

a) Draw the following scenario: Binding conditional in-kind transfer.  Be sure to show the original consumption bundle, the potential consumption bundle assuming a cash transfer, and the new consumption bundle with the in-kind transfer.

b) Redraw the final consumption bundle with the in-kind transfer from part-a.  Now consider that the individual has the ability to (illegally) sell food stamps for 50 cents on the dollar (i.e., $10 for $20 worth of food stamps).  Show how this modifies the budget constraint.  Next show her new consumption bundle after having sold some food stamps.

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