Question

   Health Care Demand An individual's demand for physician office visits in a given year is...

   Health Care Demand

An individual's demand for physician office visits in a given year is given by, Q = 10 - 0.04P, where Q is the number of office visits and P is the out-of-pocket price paid by the individual for each visit. Assume the market price of an office visit is $180.

Use this information to answer the questions below.

QUESTIONS:

1. Without insurance, how many office visits will the individual make in one year?

NOTE: round to nearest whole number

2. Suppose the individual has insurance and pays only a $40 copayment for each visit. How many office visits will the individual make in one year?

NOTE: round to nearest whole number

3. What is the moral hazard and deadweight loss (DWWL) associated with having insurance?

Moral Hazard=

DWL=

4. Based on the Nyman model, suppose the value the individual places on each visit increases by $50 when the individual is ill and has insurance.

a.) Write the general expression for the inverse demands equation, accounting for the increased value of insurance for the individual

b.) What value of Q (number of visits) represents the dividing line between welfare-increasing and welfare decreasing moral hazard?

c.) from Nyman's perspective, what is the welfare-increasing moral hazard, the welfare decreasing moral hazard, and deadweight loss (DWL) associated with having insurance?

Welfare increasing moral hazard =

welfare decreasing moral hazard -

DWL =

Homework Answers

Answer #1

Q = 10-0.04P

WHERE Q = the number of office visits

P=  the out-of-pocket price paid by the individual for each visit.

1) P = $180

Q = 10 - 0.04*180 = 2.8

2) INSURANCE DONE , P= $40

Q = 10 - 0.04*40 = 8.4

3) MORAL HAZARD associated with having insurance:

Moral hazard refers to the additional health care that is purchased when persons become insured. Under conventional theory, health economists regard these additional health care purchases as inefficient because they represent care that is worth less to consumers than it costs to produce. Moral hazard increases the amount of medical care consumed

The extent of moral hazard depends on the responsiveness of the quantity de- manded by the insured to price changes. This responsiveness may be measured by the price elasticity of demand.

moral hazard =  [(Q2-Q1)/(P1-P2)]

{8.4-2.8)/(180-40)} = 0.04

DEADWEIGHT LOSS associated with having insurance

Deadweight loss (and attendant reductions in the quantity of health care) occurs for individuals who are uninsured or are priced out of the insurance market, but there is no deadweight loss for those individuals who remain insured.

deadweight loss = 1/2 * price difference * quantity difference

= 1/2 *(180-40)*(8.4-2.8)

=392

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
An individual's demand for hospital visits per year is Q=15 – 0.1P, where P is the...
An individual's demand for hospital visits per year is Q=15 – 0.1P, where P is the price of a hospital visit. The marginal cost of producing a hospital visit is $75. a. If individuals pay full price of obtaining medical services, how many hospital visits will they make per year? b. If individuals must pay only a $40 copayment for each hospital visit, how many visits will they make per year? c. What is the deadweight loss to society associated...
Ralph has a demand curve for office visits (Qd) to the doctor in a year given...
Ralph has a demand curve for office visits (Qd) to the doctor in a year given by Qd = 20 – (P/10) where P is the price of an office visit for Ralph. If the marginal cost to the doctor for providing each visit is $50, what is the value of the moral hazard cost (hint: area of a triangle) resulting from Ralph buying this insurance?
The market demand for primary care visits is given by the inverse demand curve ? =...
The market demand for primary care visits is given by the inverse demand curve ? = 400 – 8? and the inverse market supply is ?? = 40 + 4?. Graph the market supply and demand and indicate the market equilibrium values for price and quantity. Suppose that the consumers in this market are then provided health insurance that pays for all services after consumers pay a 40% coinsurance rate for every visit. On the same graph, graph the demand...
Assume a group of health economists want to determine the demand for doctor visits. To do...
Assume a group of health economists want to determine the demand for doctor visits. To do so, they conduct an experiment in which they randomly assign 100 individuals a health insurance policy with a 15% copayment rate, and another 100 individuals a health insurance policy with a 30% copayment rate. Each doctor visit comes with a medical bill of $100. The researchers observe that among the 15% copayment group, 80 doctor visits are consumed; among the 30% copayment group, 70...
Suppose that the market demand for physical therapies is given by the equation P=100-Q. The cost...
Suppose that the market demand for physical therapies is given by the equation P=100-Q. The cost of each therapy is 40. a. What is the socially optimal number of physical therapies? b. Suppose that the price of physical therapies is 40. Suppose further that patients have insurance that pays for 50% of the price of physical therapies. How many physical therapies will be purchased? What is the amount of deadweight loss from insurance moral hazard? c. How would your analysis...
Suppose a doctor’s visit actually costs $75. Bob has demand for doctor’s visits given by the...
Suppose a doctor’s visit actually costs $75. Bob has demand for doctor’s visits given by the following equation where ?? _is the quantity demanded and P is the price of a doctor’s visit: Qd = 20-.1P a. Draw Bob’s demand curve b. How many times will Bob go to the doctor (i.e. what is his quantity demanded) if he has no insurance and must pay full price? c. How many times will Bob go to the doctor with full insurance...
Suppose that the market demand for physical therapies is given by the equation P=100-Q. The cost...
Suppose that the market demand for physical therapies is given by the equation P=100-Q. The cost of each therapy is 40. a. What is the socially optimal number of physical therapies? (2 points) b. Suppose that the price of physical therapies is 40. Suppose further that patients have insurance that pays for 50% of the price of physical therapies. How many physical therapies will be purchased? What is the amount of deadweight loss from insurance moral hazard? (4 points) c....
Terry Smith and two of his colleagues are considering opening a law office in a large...
Terry Smith and two of his colleagues are considering opening a law office in a large metropolitan area that would make inexpensive legal services available to those who could not otherwise afford services. The intent is to provide easy access for their clients by having the office open 360 days per year, 16 hours each day from 7:00 a.m. to 11:00 p.m. The office would be staffed by a lawyer, paralegal, legal secretary, and clerk-receptionist for each of the two...
1. The UK's national health service is a "socialized medicine" setup includes private gatekeepers is financed...
1. The UK's national health service is a "socialized medicine" setup includes private gatekeepers is financed through taxation provides universal healthcare all of the above 2. Queues result from ______________________ of medical services demand being equal to supply demand greater than supply demand less than supply is a cavalcade of tweeter posts and replies that lead to an analysis none of the above 3. Germany's health care system is composed of 99% public hospitals mixed system of care for the...
READ THE CASE STUDY AND ANSWER THE FOLLOWING QUESTIONS 2nd CASE: An Unexplained Death A 65-year-old...
READ THE CASE STUDY AND ANSWER THE FOLLOWING QUESTIONS 2nd CASE: An Unexplained Death A 65-year-old man of Scandinavian descent was rushed to the Emergency Room of your local hospital after a family member discovered him unconscious in his home. The woman who dialed “911” told the dispatcher that the man, her brother, was the local librarian of the past 10 years and had no spouse or children. She reported that they had spoken the day before, and he had...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT