Doctor.s visits cost $20, and the typical consumer has an income of $100. Consumers spend all of their incomes on doctors visits and a .composite good.that costs $1 per unit. Suppose the local government is considering two health plans. Under plan A, government will give out vouchers worth two free visits to the doctor. Under plan B, government will give out four 50% coupons to be used at the doctors o¢ ce.
(a) Draw the new budget constraint the consumer faces under plan A.
(b) Draw the new budget constraint the consumer faces under plan B.
(c) For whom is the choice of plan A or plan B not likely to matter. those who are quite well, or those who are quite sick? (Hint: Superimpose some indifference curves on your budget constraints.)
(d) Which plan would someone who is generally well (not sick) be likely to choose, if odered a choice?