Discussion:
1.) Consider food stamps.
a) Draw the following scenario: Binding conditional in-kind transfer. Be sure to show the original consumption bundle, the potential consumption bundle assuming a cash transfer, and the new consumption bundle with the in-kind transfer.
b) Redraw the final consumption bundle with the in-kind transfer from part-a. Now consider that the individual has the ability to (illegally) sell food stamps for 50 cents on the dollar (i.e., $10 for $20 worth of food stamps). Show how this modifies the budget constraint. Next show her new consumption bundle after having sold some food stamps.