1.5 Consider the analysis described in Figure 22.6. Tom and Dick each earn $25,000 per year.

Tom has a spouse and two children, and Dick is unmarried. Health insurance and other goods trade off dollar for dollar (there is no tax advantage to health insurance).

a Where would each of the two be located on the budget constraint, and why?

b Which of the two would more likely take up a health insurance program, such as Medicaid?

c How would your answers to the first two parts change if health insurance were subsidized

(as it is) relative to all other goods?