suppose that in the absence of insurance, the inverse demand for office doctor visits is given...

suppose that in the absence of insurance, the inverse demand for office doctor visits is given by the equation P=150 - 30Q.
a. Graph the demand curve.
b. graph the demand curve when the person has health insurance with a coinsurance rate of 25%.
c. what is demand for visits with and without insurance when doctors receive €60/visit?

Solutions

Expert Solution

From question, P=150—30Q

Or 30Q=150—P

Q=5—1/30 P

a.......... When P=0 Q=5 (the horizontal intercept)

and when Q=0 P= 150 (the vertical intercept)

Now we can draw a demand curve very easily,

b....... Now demand curve with a health insurance with 25 %coinsuranse rate Demand ccurve will change now , we know that amount above the coinsuranse rate is paid by the insurance company.

So, coinsuranse rate (C) =25% =0.25

New demand function, P=150 /c —30Q/c = 150/0.25 —30Q/0.25

P=600—120Q

Here when Q=0 then P=600 and when P=0 then Q=5

We can draw the demand curve with a health insurance with 25 %coinsuranse rate with this new demand function.

C....... Now we have demand function with and without insurance, so putting the price (€60)in bboth the functions , we can find out the desired value

Without insurance Q= 5-1/30P =5—(1/30) ×60 = 3 answer

With insurance P =600—120Q so Q= 600/120 —1/120 P

Q=5—(1/120) ×60 =4.5 answer.

Diagrams of a and b

Rahul Sunny answered 1 year ago

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