Show and Explain Why Substituting an Unrestricted Cash Transfer for an Excise

question 22

Essay

Show and explain why substituting an unrestricted cash transfer for an excise subsidy of equal cost to the government must lead to less consumption of the subsidized good and more consumption of other goods.

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Definitions:

Single-payer System

A healthcare system where a single public or quasi-public agency organizes healthcare financing, covering all residents, while care providers remain independent.

Voluntarism

Voluntarism is the principle that emphasizes the importance of individual will or voluntary actions in the determination of social or political outcomes.

Free Rider Problem

A situation in which some individuals benefit from resources or services without paying their fair share of the costs, leading to undersupply or overuse.

Insurance Scheme

A system or plan that provides financial protection against certain risks, such as illnesses or accidents, typically through the collection of premiums.