Quantity tax and Food Stamps
(a) Consider a two-good (X and Y) model. How does a quantity tax (i.e. per unit tax) on good X affect the budget line of a consumer?
(b) A country recently passed a food stamp legislation. Qualified households are given food stamps, which can be used to purchase foods, but they cannot legally re-sell them. Suppose a household receives a grant of $300 of food stamps per month. How will this household's budget line be affected? (Hint: Consider two goods: food and other goods.)