All other things equal, if an individual earning $100,000 per year has an income elasticity of demand for health care of 0.4, if her salary increases by 10%, her expenditures on health care will increase by $4,000. True False
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- The consumer demand equation for tissues is given by q = 11,664 −216 p +p2, where p is the price per case of tissues and q is the demand in weekly sales. Determine the price elasticity of demand E when the price is set at $24. (Round your answer to three decimal places.)E =Suppose you have two persons, one with more elastic demand for medical care than the other. If they both obtain identical health insurance coverage (or both have their % of costs paid by insurance increased), whose demand will be affected most? Given what you know about relative demand for MC for well vs. ill individuals, more educated vs. less educated persons, and wealthy vs. less wealthy individuals, which of each pair will have the greatest increase in demand under health insurance?Indicate whether the statement is true or false, and justify your answer.In the RAND HIE, the arc elasticity of demand for inpatient care was larger (in absolute value) than the arc elasticity of demand for outpatient care.
- Demand studies in health care have provided estimates of both income and price elasticity. Estimates of income elasticity are usually above +1.0. Estimates of price elasticity typically range between -0.1 and -.75 (with hospital services at the lower end and elective services at the upper end). What information do these estimates convey? What does the price elasticity of demand estimates imply for government policymakers, insurance companies, and medical providers' decisions? What does the income elasticity of demand estimates imply for government policymakers, insurance companies, and medical providers' decisions?Discuss what is known about price elasticities of demand for various health care servicesSuppose consumers consume and gain utility from two types of goods and services – (1) health care and (2) all other goods & services. Using this information, derive the demand curve for health care.
- Suppose you are collecting data from a country like Japan where the government sets the price of healthcare. Each prefecture in Japan has a different set of prices (for example, Tokyo has higher prices than rural Hokkaido). Data for 1999 are displayed in the table below. Region Outpatient Visits per Month Price per Visit Tokyo 1.25 25 Hokkaido 1.75 15 (4 points) What is the arc price elasticity of demand for health care consumers in Japan (using only these data)? (4 points) Suppose that incomes are generally much higher in Tokyo than Hokkaido. Is your answer to the last question an overestimate or underestimate of price elasticity? Justify your answer. (c) (4 points) Using your estimated elasticity, what would the demand for health care be if the price in Tokyo were raised to 30 per visit? What would the demand in Hokkaido be if the price were lowered to 5 per visit?The price elasticity of demand for health care has been estimated to be −0.2. Characterize this demand as price elastic, unit price elastic, or price inelastic. The text argues that the greater the importance of an item in consumer budgets, the greater its elasticity. Health-care costs account for a relatively large share of household budgets. How could the price elasticity of demand for health care be such a small number?Medicare recipients can purchase supplemental private insurance (known as Medigap insurance) to fill the gap in coverage left by Medicare. This gap includes copayments, deductibles, and prescription drug expenses not covered by Medicare. Several years ago, the government enacted regulations that specify minimum standards for items that Medigap policies must cover. This made the policies more expensive, and as a consequence, about 25 percent of the elderly who would have purchased some Medi-gap insurance purchased none at all [Finkelstein, 2004]. Consider an individual who consumes two goods, "insurance" and "all other goods." The cost of a unit of Medigap insurance is $1, as is the cost of a unit of all other goods. Sketch a budget constraint and set of indifference curves that are consistent with the following scenario: In an unregulated market, an individual with a $30,000 income purchases $5,000 worth of Medigap insurance. The government then puts mandates on Medigap policies that…
- The price elasticity of demand measures how much the quantity demanded responds to changes in the price. In health care, demand is relatively inelastic because close substitutes exists. a. True b. FalsePrice elasticities of the demand for health care are usually much lower (in absolute terms) at the individual provider level than at the aggregate level. a.True b.FalseIndicate whether the statement is true or false, and justify your answer. Aging shifts the marginal efficiency of investment in health curve inward.