Question

Get data from at least 3 allergy doctors: what does the doctor charge for allergy shots for uninsured patients? What is charged for insured patients (the important number here is  the total amount received by the doctor, including the payment coming from the insurance company)? In which market segment would you expect a lower price elasticity, and given the formula concerning price and elasticity in Chapter 11), is the doctor's pricing consistent with the theory?

Answer 1

Doctor 1                            

Price per shot for uninsured patients= $ 50

Price per shot for insured patients= $ 80

Doctor 2

Price per shot for uninsured patients= $ 25

Price per shot for insured patients = $ 48

Doctor 3

Price per shot for uninsured patients= $ 20

Price per shot for insured patients = $ 60

In the set of three doctors, let us consider take the price charged by Doctor 1:-

The price per shot for insured patients = $ 80 (which will be paid to the doctor by the insurance company)

The price elasticity would be lower as in the case of insured patients as the amount will be borne by the insurance company. The doctor's pricing is consistent with the theory as the price charged per shot for insured patients is higher than the uninsured. This is because, in the case of uninsured patients, the degree of elasticity is higher as they could go to another doctor who charges lesser.