Suppose that without a seat belt, drivers who travel at 0 mph have a 100% chance of staying alive, while drivers who travel at 100 mph have 0% chance of staying alive. Suppose that with a seat belt, drivers who travel at 0 mph have a 100% chance of staying alive, drivers who travel at 100 mph have a 50% chance of staying alive, and drivers who travel at 200 mph have a 0% chance of staying alive.
a. Draw an indifference curve diagram relating safety (measured by chance of staying alive) on the horizontal axis and speed (measured in mph) on the vertical. Draw the budget constraints of a driver with a seat belt and a driver without a seat belt. (You may assume these constraints are straight lines.)
b. True or False: If speed and safety are both normal goods, then the invention of seat belts will certainly make people drive faster but might or might not save lives. Explain your answer in terms of substitution and income effects.