e. suppose the government changes the tax law so that individuals can now deduct the cost of health insurance from their personal incomes. if vanessa gets the $17,500 raise and then spends all of it on health insurance, will her tax liability change? no correct how much will she be able to spend on health insurance?

The amount of taxes owed by Vanessa won't alter. She will be able to purchase health insurance for $5000. She won't favour HeadBook anymore while purchasing insurance.

Explanation:

Vanessa's taxable income won't change as a result of the fact that people can now deduct the expense of health insurance. As a result, she will still owe the same amount of income tax (so that her taxes paid will increase by zero dollars.) The cost of her health insurance will be $5000. As she can now afford just as much if HeadBook gives her the $5000 raise as if HeadBook spent the $5000 directly buying her health insurance, she will no longer prefer for HeadBook to purchase insurance for her.

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