Otis consumes two commodities, healthcare and all other goods (the composite good).

a. Assume that Otis can consume all the health care he wants at a price of pH per unit, sketch

his budget constraint.

b. Suppose that the government announces that it will provide H* units of health care to Otis

at no charge to him. However, enrollment in the government program precludes the

purchase of health care from private practitioners. In your diagram, sketch the budget

constraint associated with this program.

c. Suppose that Otis has a choice between purchasing health care in the market or

participating in the government program. Using your answers to parts a and b, show with

indifference curves how it is possible that "free" provision of health care by the government

may lead to a decrease in the consumption of health care.