Question

PART I

Demand and supply of office visits with cardiologists in Fairfax (market period: 1 week)

Assume no insurance

Price                           Demand                                  Supply

140                              1000                                        1375                                       

130                              1100                                        1350

120                              1200                                        1325

110                              1300                                        1300

100                              1400                                        1275

90                              1500                                        1250

80                              1600                                        1225

70                              1700                                        1200

60                              1800                                        1175

50                              1900                                        1150   

1. Graph demand (D1) and supply (S1) and determine the market price/quantity equilibrium. (use the graph at the end of the assignment, or if you use another be sure to use one with a grid so you can plot accurately. Be sure to label all demand and supply curves).

2. Over the next 5 years due to population growth and an aging population, demand for cardiology office visits increases by 25 percent. The supply of cardiologists increases by 10 percent as medical schools expand a little and a small number of additional doctors from foreign countries are certified to practice in the U.S. Graph the new demand curve (D2) and the new supply curve (S2). What is the new price/quantity equilibrium?

Answer 1

In excel, input the table given, select it and then choose insert- scatter plot (with lines). This will give the scatter plot of demand and supply. However, it won't display price on the y axis. So, to do this, right click on the chart, and go to Select Data. Now in the y axis option- enter the name of the cells which contain price, and in the x axis option- enter the name of the cells which contain demand. Do the same for supply.    

Here, the market equilibrium is where the demand and supply curves are intersecting, i.e at price=110 and quantity= 1300

Now, calculate new demand and supply by increasing demand/ supply at each price by 25% or 10%, respectively. For example- new demand at price 140 will be 1000 + .25*1000 = 1250 and new supply will be 1375 + .1*1375 = 1512.5

Repeat the steps given above to graph the new demand and supply curves.

From the graph, the equilibrium price is 122.5 and equilibrium quantity is around 1465.