Consumption of both types of goods relative to cash transfer

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When I explain to my friends that we can help poor people more if we just give them cash transfers, they complain that the poor people will spend the money on things that are bad for them. Assume there are two types of goods—“good-for-you” goods and “bad-for-you” goods. Both of these goods are, indeed, goods to the people who consume them. Show how a subsidy for “good-for-you” goods affects consumption of both types of goods relative to a cash transfer. Does this help to explain my friends’ position?

Reference no: EM13995952

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