Expenditure by South Africans on health care has seen a dramatic increase over the last couple...

  

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Expenditure by South Africans on health care has seen a dramatic increase over the last couple of years. Many have claimed that the large increase in spending has primarily been a result of a very inefficient system characterised with high prices for health care services. As a result, a significant amount of South Africans' budgets has been directed towards these goods compared to the money spent on recreational activities. 4.1 4.2 Suppose, due to a strong performance of the economy over the third quarter, average income levels of South Africans increase. With health care (HC) on the y-axis and the consumption of (3) recreational activities (RA) on the x-axis, illustrate the income-consumption curve if recreational activities are considered an inferior product. In an effort to increase the consumption of recreational activities the Department of Tourism announces a 5% decline on the price of all local holiday trips. Illustrate the income and (2) substitution effects if recreational activities are in fact considered to be Giffen goods. Expenditure by South Africans on health care has seen a dramatic increase over the last couple of years. Many have claimed that the large increase in spending has primarily been a result of a very inefficient system characterised with high prices for health care services. As a result, a significant amount of South Africans' budgets has been directed towards these goods compared to the money spent on recreational activities. 4.1 4.2 Suppose, due to a strong performance of the economy over the third quarter, average income levels of South Africans increase. With health care (HC) on the y-axis and the consumption of (3) recreational activities (RA) on the x-axis, illustrate the income-consumption curve if recreational activities are considered an inferior product. In an effort to increase the consumption of recreational activities the Department of Tourism announces a 5% decline on the price of all local holiday trips. Illustrate the income and (2) substitution effects if recreational activities are in fact considered to be Giffen goods.

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Income Effect With the increase in average income levels of South Africans the income ef... View the full answer