Consider the following equations of demand and supply for healthcare: P 3000-40
ID: 2618026 • Letter: C
Question
Consider the following equations of demand and supply for healthcare: P 3000-40 P-300+20 For all of the following questions round numbers to the nearest integer. For instance if the answer is 426.78, then write 427. If the answer is 1313.489, then write 1313, Do not use the dollar sign or commas-just write in the plain number). 1) What is the initial equilibrium quantity? (Type the number into the first box) (1 pt) 2) What is the initial equilibrium price? (Type the number into the second box) (1 pt) Now consider that there is an insurance that has a 40% coinsurance rate. 3) What is the new equilibrium quantity? (Type the number into the third box) (2 pts) 4) What is the new equilibrium price? (Type the number into the fourth box) (2 pts) 5) What is the deadweight loss due to this insurance? (Type the number into the fifth box) (4 pts)Explanation / Answer
Using , concept Supply = Demand
=> 3000-4Q = 300+2Q
=> Q = 450
Value of P = 3000-4Q= 300+2Q = 1200
Answer 1) intial equillibrium quantity = 450 units
Answer 2) intial equillibrium Price = 1200
Co-insurance” is called “Co” because it includes a sharing of costs between the client and the insurance company, at in case of claim . 40% co-insurance means 40/60 , it means insurance company will pay 60%
Answer 3) No change is equillibrium quantity
Answer 4) Price equllibrium , 1200 * 40% = 480
Answer 5)dead weight loss ,is extra burden on the market due to extra cost
= 450* 40% = 180 units