Economists usually do not favor subsidies on specific products or in-kind paymen

Question

Economists usually do not favor subsidies on specific products or in-kind payments to help low income people. This is because

A. in-kind payments suggest that the poor person does not have an indifference curve pattern from which to make choices.

B. a subsidy means that the recipient does not face a budget line anymore and therefore can not maximize his welfare efficiently.

C. the poor person could have increased utility if the same money used to subsidize a product would be given to them to use as they choose.

D. economists are individualists who believe that helping the needy makes them dependent.

Explanation / Answer

The subsidies indirectly increases the income of the consumer but he is not given right to have it but he can only enjoy subsidies when he buys that particular product on which subsidy is being distributed. In this case the income indirectly increases because of subsidy but he can have more satisfaction or utlity if he is given subsidy payments directly. Direct subsidy payment will shift their budget line and will mive the consumer to a higher indifference curve.

So the correct option should be C. The poor person could have increased utility if the same money used to subsidize a product would be given to them to use as they choose.

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.