Suppose the government is considering a program to give housing vouchers to poor people. Assuming the value of the voucher is greater than the amount currently being spent on housing per month by poor people, which of the following must be true?
A)The housing voucher will necessarily cause more units of housing to be consumed by poor people, whereas an unrestricted cash subsidy with the same dollar value would not.
B)The housing voucher will lead to fewer apartments for poor people.
C)A subsidy is always preferable, no matter what the policy goal as it allows for freedom of choice.
D)Voucher systems have no impact on the housing market.

Question

Quizplus · Accepted Answer

A voucher specifically designated for housing would incentivize poor people to use the voucher on housing, leading to an increase in the number of units of housing consumed by poor people. An unrestricted cash subsidy would not necessarily be used for housing and may not lead to an increase in the number of units of housing consumed by poor people. The housing voucher will incentivize poor people to consume more housing as the value of the voucher is higher than what they are currently spending on housing. An unrestricted cash subsidy may not necessarily lead to increased consumption of housing.

Suppose the Government Is Considering a Program to Give Housing