Question

In: Economics

Assume demand for medical care is given by x = 10-p. Derive the quantity demanded when...

Assume demand for medical care is given by x = 10-p. Derive the quantity demanded when the person is uninsured and the price is p = 6. Now consider an insurance policy with deductible of $60 and free coverage after the deductible. With this insurance, the quantity demanded:

A. Stay the same with respect to the quantity demanded when uninsured

B. Increases by 6 with respect to the quantity demanded when uninsured

C. Decreases by 6 with respect to the quantity demanded when uninsured

D. None of the above

Solutions

Expert Solution

We are given

x=10-p

put p=6

x=10-p=10-6=4

Total Cost on medical care=p*x=6*4=$24

In case of insurance, first $60 will be paid by consumer which is higher than the total expenditure at prevailing prices.So, consumer will keep the quantity demanded unchanged.

So, correct option is

Stay the same with respect to the quantity demanded when uninsured

'

Rahul Sunny answered 2 years ago
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