Assume the government and opposition parties are debating the relative merits of some alternative policies to
help support pensioners following an increase in energy prices.
- Opposition party ‘A’ wants to provide pensioners with a subsidy that halves the price of electricity per kilowatthour.
- Opposition party ‘B’ wants to provide pensioners with energy vouchers that they can only spend on heating
bills. - The government wants to provide pensioners with a lump sum unconditional cash payment i.e. they are free
to spend this money on whatever goods they want.
Using the rational choice model, compare and contrast the impact of these three different policies. Assume in
your analysis that the costs to the taxpayer of each scheme are the same