Now, suppose that all consumers have health insurance. Health insurance allows consumers to see the doctor at half price (ie there is 50% coinsurance)
Suppose that the market for doctor
visits can be characterized by the following supply and demand
equations: Q = 300  P Q = 2P 
10.5. 
Problem Set #5  Part II  10.5 (E) What is the price that consumers pay for a doctor visit? Assume that every visit is covered by insurance. 


Solution:
Given that
all consumers have health insurance.
Health insurance allows consumers to see the doctor at half price (ie there is 50% coinsurance)
Q = 300  P
Q = 2P
(10.5) Assuming that every visit is covered by insurance, the price that consumers pay for a doctor visit is:
option (E) : $120
calculation:
Price paid by consumers decreases by 50%. So, price paid by them
= P  50% of P = P  (0.5P) = 0.5P
So, new demand is: Q = 300  0.5P
New equilibrium occurs where new demand = supply
So, 300  0.5P = 2P
So, 2P + 0.5P = 300
So, 2.5P = 300
So, P = 300/2.5
P = 120
Hence price that consumers pay for a doctor visit is: $120
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