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A hypothetical welfare programme accepts households with monthly income below ₹20,000. Two otherwise similar households earn ₹19,900 and ₹20,100. Which observation best illustrates a limitation of a strict income cutoff?

Answer and explanation

Correct answer: A small income difference can produce a large difference in eligibility

Under the stated rule, ₹19,900 qualifies because it is below ₹20,000, while ₹20,100 does not. A strict eligibility threshold can therefore treat households differently even when their incomes are close.

Related tags

Eligibility ThresholdsWelfare PolicyIncome CutoffDistributive Effects

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