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Price Quantity, economics homework help
Price Quantity
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(2.) Consider the following information on Ian’s demand for visits per year to his health clinic, which is based upon the fact that his insurance does not cover clinical visits (that is, based upon a 100% coinsurance rate):
a. Ian has been paying $30 per visit (V). How many visits does he “consume” per year? Draw his demand curve.
b. Suppose now that Ian’s insurance company institutes a 70% coinsurance feature (that is, Ian pays 70% of the price of each visit). Show what happens to the demand curve. What is Ian’s new equilibrium quantity?
c. Appraise this statement: Compared with a 70% coinsurance rate as in part (b), Ian’s price elasticity of demand would lower if the coinsurance rate was 60%. (No calculations are needed to answer this question, so don’t calculate elasticity!)
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