Suppose that consumers spend their income on either health insurance or on a “composite good”. Find the optimal bundle of health insurance (HI) and other goods (G) given the following budget constraint and utility function. How much utility does this bundle give the individual? Put HI on the x axis of any graphs. Budget constraint: 1600 = 160*HI + 20*G Utility function: U=HI*G where MRS = -G/HI

Suppose that consumers spend their income on either health insurance or on a “composite good”. Find the optimal bundle of health insurance (HI) and other goods (G) given the following budget constraint and utility function. How much utility does this bundle give the individual? Put HI on the x axis of any graphs. Budget constraint: 1600 = 160HI + 20G Utility function: U=HI*G where MRS = -G/HI

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter6: Consumer Choice Theory

Section: Chapter Questions

Problem 23SQ

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Given: Budget constraint: 1600 = 160*HI + 20*GUtility function: U=HI*G where MRS = -G/HI Consider someone who has an optimal bundle of health insurance (Hi) of 5 and other goods (G) of 40 (Hi = 5, G = 40). Assume that this individual prefers to optimally purchase no health insurance (Hi). On a graph, draw the budget constraint offered above and include the indifference curve for a person who optimally chooses to be uninsured.
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