There are two senior advisors to the government, A and B, both of whom agree that the poverty line is at $4,000 for a single person. However, they have different equivalence scales. Mr. A believes that the scale factor in determining equivalent income should be 0.25 for each additional family member. Mrs. B suggests that the scale factor should be 0.75.
a. Find the poverty line for families of two, three, and four under both values of the scale factors 0.25 and 0.75.
b. Explain how Mr. A and Mrs. B must have very different views about income sharing within a family to end up with such different answers.
c. Suppose that the government is committed to providing welfare eligibility to every family below the poverty line. If this government wishes to keep total spending to a minimum, which of the two views should it support?