If the government would like to induce a consumer to consume a specific level of some good:
A)a cash subsidy system would likely be cheaper for the government than a voucher system.
B)a voucher system would likely be cheaper for the government than a cash subsidy system.
C)the government should only use a cash subsidy system since this always make consumers better off.
D)the government should only use a voucher system since this always makes consumers better off.

Question

Quizplus · Accepted Answer

A voucher system would allow the government to restrict the use of the subsidy to the specific good they want consumers to consume, reducing the risk of consumers using the subsidy for other goods. Additionally, the government can negotiate directly with producers to provide the goods at a discounted rate, further reducing costs. A cash subsidy system would not have these benefits, as consumers could use the cash subsidy for any good, and it would be more difficult for the government to negotiate discounted rates with producers. A voucher system would be cheaper for the government because it ensures that the subsidy is only being used for the specific good that the government wants to induce consumption of, whereas a cash subsidy system may lead to consumers using the money for other goods or services. Additionally, a voucher system allows the government to set specific criteria or conditions for the subsidy to be redeemed, increasing control and effectiveness of the program.

If the Government Would Like to Induce a Consumer to Consume