Problem 1:

Health insurance leads to health promotion. Using diagrams, describe the impact of health insurance on the demand for health care.

(a) Distinguish between negative and positive externalities? Justify your answer using examples.

(b) To what extent do government policies corrects for both externalities?

Problem 2:

(a) Using diagram, describe the impact of:

(i) Wage floor in the labour market.

(ii) Rent ceiling in the market for apartment.

(b) Describe the economic impact of taxes.

(c) Using the demand for cigarettes determine the effectiveness of a tax levy.