EBK HEALTH ECONOMICS
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ISBN: 9781137029973
Author: TU
Publisher: YUZU
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Question
Chapter 2, Problem 7E
To determine
The elasticity of demand for health care.
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Indicate whether the statement is true or false, and justify your answer.For a given disease (with all else equal), if a vaccine has a higher prevalence elasticity of demand, a vaccine subsidy will be a more effective tool to control the equilibrium number of people infected with the disease.
Based on the data presented in the table below estimate elasticity of demand for two price changes: a) price increase from $3 to $9 per hour; and b) price decrease from $9 to $3 per hour. Make sure to use the midpoint formula.
Price Per Hour of Therapy
Demand for Therapy
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16
1
15
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14
3
13
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12
5
11
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10
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9
8
8
9
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10
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11
5
12
4
13
3
14
2
15
1
16
0
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.
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- Indicate whether the statement is true or false, and justify your answer. Unlike with most types of goods, deriving a demand curve for health care is quite simple because people rarely skimp on health care.arrow_forwardIndicate whether the statement is true or false, and justify your answer.Nearly half of expenditures on health care in the US are government financed.arrow_forwardSuppose 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?arrow_forward
- Indicate whether each statement is true or false, and justify your answer.Cost–benefit analysis (CBA) allows us to pick an optimal treatment from the list of potentially cost-effective treatments.arrow_forwardThe Chief Medical Officer has advised the government that consumption of widget-corn improves the survival rate of COVID-19 by 20%. Suppose the supply and demand functions for widget-corn are: QD = 100 – 5P QS = 5P. P is the price in dollar and Q is the quantity in kilograms. Having confirmed the positive impact of widget-corn consumption on COVID-19 patients, the government has ordered widget-corn sellers to charge $5 per kilogram. Calculate the impact of the policy on the quantity of widget-corn supplied and demanded. Explain the impact of the policy consumer surplus, producer surplus, and total economic surplus. Is the outcome of the government’s policy efficient and, therefore, maintained or abandoned? Explain in detail.arrow_forwardAll 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 Falsearrow_forward
- Indicate whether the statement is true or false, and justify your answer. Aging shifts the marginal efficiency of investment in health curve inward.arrow_forwardIndicate whether the statement is true or false, and justify your answer.Disproportionate spending on end-of-life care is never clinically justifiable.arrow_forwardSuppose 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?arrow_forward
- 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?arrow_forwardIndicate whether the statement is true or false, and justify your answer.Patients in France typically pay all their health fees directly to the doctor and are later reimbursed by their insurance fund.arrow_forwardIndicate whether the statement is true or false, and justify your answer.If a disease is shown to have a surprisingly high prevalence elasticity of demand for self-protection, policymakers should conclude that an eradication campaign is going to be more difficult than expected.arrow_forward
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