The Government Under Its Welfare Program - 1226 Words

1. Introduction In this essay we compare two policies which are proposed by the government under its welfare program in order to encourage the consumption of other goods. There are 3 groups of individuals, consuming two baskets of goods, food beverages, and others. The restriction faced by the government is that the utility cannot be changed, which means keeping the consumers equally happy as they were without these policies without changing the welfare. The aim of both policies is to increase the consumption of other goods because the government believes that it would improve the standard of living for the families and hence encourage the couples to create families. The purpose of this coursework is to assess which policy option is more effective in achieving the government’s targets. This paper will be based on technical approach and scientific methods such as optimization, consumer theory, Slutsky decomposition and appropriate graphs presented that are applied to accurately illustrate and analyse the impact of the policies. Findings of this investigation have revealed that both policies are not implementable and not consistent. But policy 2 is more effective and is seen as clear winner when implemented since it is the only policy that ultimately increases the consumption of other goods, however still needs some intervention in terms of its improvement, whereas policy 1 is never effective as the net effect is 0. 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