Assume a government wants to promote affordable housing. Which of the following

Question

Assume a government wants to promote affordable housing. Which of the following options would give higher utility to the recipients: a housing voucher usable in the private housing market, or increasing the availability of public housing? Assume in this case the cost of a housing voucher and the cost of an additional unit of public housing are the same. In other words, the government sets the value of the housing voucher equal to what it would cost to provide a unit of public housing instead. Explain your answer about which policy would provide higher utility.

Explanation / Answer

Increasing the availability of public housing provide higher utility because higher availability decreases the market price

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