Does equal-value cash always provide at least as much welfare as in-kind aid?
Cash expands choice without a composition rule; taxes and in-kind aid reshape the budget differently.
Follow the cause and effect
Draw the original budget as a benchmark.
Rotate for a unit tax or shift parallel for a lump-sum tax.
Compare the cash set with the quantity restriction under in-kind aid.
The model you are using
Conditions for this model
Fixed prices, optimizing recipients, no voucher resale, and no externalities or donor objectives.
The exam trap
Equal face value does not imply equal utility if the preferred bundle is excluded.
Connect the reasoning to the graph
What changes
- An x-only voucher creates a kinked budget and matches cash only when its restriction is nonbinding.
What stays fixed
Fixed prices, optimizing recipients, no voucher resale, and no externalities or donor objectives.
Keep these conditions throughout the comparison; change only what the case above specifies.
What to inspect
Compare the cash set with the quantity restriction under in-kind aid.
Compare before and after, and locate the conclusion on the graph.
5 MINUTES · TRANSFER THE IDEA
Can you explain it without the lesson?
Draw 60 baht cash versus a 60-baht food voucher for someone who would buy only 30 baht of food.