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Homework answers / question archive / The public health director of a remote, rural area in northern Ontario has a discretionary budget of $500,000 and wants to spend it to save as many lives from obesity-related diseases as possible

The public health director of a remote, rural area in northern Ontario has a discretionary budget of $500,000 and wants to spend it to save as many lives from obesity-related diseases as possible

Economics

The public health director of a remote, rural area in northern Ontario has a discretionary budget of $500,000 and wants to spend it to save as many lives from obesity-related diseases as possible. Two of the possible approaches being considered include: Prevention (through informative health campaigns on the adverse effects of junk food consumption) and a price subsidy on healthier food choices (making these foods more affordable). Medical studies indicate the following results for the two alternatives: Prevention Price Subsidy Cost Cost Total Lives Saved Total Lives Saved $100,000 200,000 300,000 400,000 500,000 300 500 650 760 800 $100,000 200,000 300,000 400,000 500,000 100 275 325 350 360 Suppose the value of a life is worth $1 million. 23. The most cost-effective way of allocating the $500,000 budget is to spend it entirely on prevention. 24. If $500,000 of the budget was initially allocated for prevention but then $100,000 of that was reallocated to the price subsidy, then the net benefit of that marginal change would be $60 million.

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