Answer to Question #147027 in Microeconomics for Zoey

Question

In a world of two goods X and Y, the government is considering two different
schemes to help the poor to buy more X, but at the same time, makes them equally
better off. The price of good Y is 1.
Scheme 1. Offer them a subsidy of s per unit.
Scheme 2. The government will give an amount of money equivalent to the Equivalent
Variation(EV) to the poor.
Which scheme will cost the government less money?

Answer 1

Scheme 1. Offer them a subsidy of s per unit.

This will encourage them to increase output of goods or services.