Suppose you decide each month how much of your disposable income to spend on health insurance and on other goods. Suppose that both “health insurance” and “other goods” are normal goods. Each unit of health insurance costs $10, and your monthly income is $3000.
The government gives everyone a voucher good for $500 of health insurance per month. [You can buy additional health insurance on top of that at the $10 price.]
A government critic slams the new policy, saying, “Instead of a voucher, they should just give out $500 cash.” Give one reason why you agree, and one reason why you disagree. (State each reason in 3 lines or fewer)