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Unformatted text preview: PADP 6950 Fertig Fall 2011 UGA Homework 1 Due August 31, 2011 1. Find the optimal bundle of health insurance (HI) and other goods (G) given the following budget constraint and utility function. Budget constraint: 1500 = 150*HI + 25*G Utility function: U=HI*G where U=150 2. Now assume that Medicaid is introduced. Medicaid is a public health insurance program for the poor. Assume that the individual described above is eligible. Medicaid offers a fixed bundle to the eligible: they can have 3 units of health insurance for no cost. Assume that people cannot buy both Medicaid and private health insurance. a. Does the individual described above choose to enroll in Medicaid? Explain your answer with graphs. b. Does their consumption of health insurance go up or down with the introduction of Medicaid? 3. Draw a separate graph with the budget constraint given above with an indifference curve of someone who chooses to be uninsured in the absence of the Medicaid program. ...
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- Spring '11