This diagram shows food on the horizontal axis (0–35 units) and other goods on the vertical axis (0–$120). Budget lines show what the household can afford; indifference curves show equal-utility combinations. The grey dashed line is the original budget. When a subsidy is active the red line shows the rotated subsidy budget and the green line shows the parallel cash-transfer budget. Optimal choice points are marked. The cash transfer reaches a higher indifference curve than the food subsidy at the same government cost, illustrating the lump sum principle.
This diagram shows leisure hours (0–2,700) on the horizontal axis and annual income ($0–$40,000) on the vertical axis. The grey dashed line is the budget constraint without welfare benefits. The red line shows the welfare budget constraint, which is kinked: to the right of the benefit cut-off point the household receives the full base benefit (flat segment); to the left the effective slope reflects the net wage after benefit reduction. The grey dot marks the no-welfare choice; the red dot marks the choice with the current welfare policy. At 100% reduction rate, the household maximises utility by taking all leisure (2,500 hours) and living on benefits alone — the poverty trap.