EBK HEALTH ECONOMICS AND POLICY
7th Edition
ISBN: 9781337668279
Author: Henderson
Publisher: YUZU
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Chapter 5, Problem 9QAP
To determine
Whether price
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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?
What would be the effects on price and quantity if physicians can induce demand?
Suppose that a study finds that the price elasticity of demand for MRI's is 0.3 (in absolute value). If the price of care were to ___ by 3%, we would expect the quantity of preventative care consumed to fall by ____%.
Suppose that a study finds that the price elasticity of demand for MRI's is 0.3 (in absolute value). If the price of care were to ___ by 3%, we would expect the quantity of preventative care consumed to fall by ____%.
a. fall; 0.3%
b. rise; 0.9%
c. rise; 0.3%
d. fall; 0.9%
Chapter 5 Solutions
EBK HEALTH ECONOMICS AND POLICY
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- Demand falls by 5 percent for every 10 percent increase in price health care services. How much is the won price elasticity of demand for health care?arrow_forwardWhat factors cause Physician Induced Demand, and how do you diagnose it?arrow_forwardWhat does price elasticity of demand mean for insurance companies and medical providers for making a decision?arrow_forward
- One of the significant problems in medical care markets may be the information problem. Asymmetric information has led to two important defects in the medical marketplace. What are they? How do these defects affect medical markets?arrow_forwardIn a commentary piece on the rising cost of health insurance, ("Healthy, Wealthy, and Wise," Wall Street Journal, May 4, 2004, A20), economists John Cogan, Glenn Hubbard, and Daniel Kessler state, "Each percentage-point rise in health-insurance costs increases the number of uninsured by 300,000 people." Assuming that their claim is correct, demonstrate that the price elasticity of demand for health insurance depends on the number of people who are insured. What is the price elasticity if 192 million people are insured? If 192 million people are insured, then the price elasticity of demand for health insurance is (Enter a numeric response using a real number rounded to three decimal places. Be sure to include the minus sign.) What is the price elasticity if 247 million people are insured? (Enter a numeric If 247 million people are insured, then the price elasticity of demand for health insurance is response using a real number rounded to three decimal places. Be sure to include the…arrow_forwardConsidering Healthcare price elasticity, would it be a good idea to implement a price increase on medical products?arrow_forward
- Suppose the government imposes a system of price ceilings in the health care industry as part of an overall health care reform bill. a) draw a graph of the health care market and show equilibrium price and quantity. b) assume the government imposes an effective price ceiling in the health care market. Show the price ceiling in your graph. Indicate what will happen to quantity demanded and quantity supplied of health over time ? c) would a shortage or surplus result ? I llustrate in your graph.arrow_forwardSuppose the income elasticity of demand for health care insurence is 0.3. If the level of income decreasesd by 1 percent , The demand for health insurence will 1.rise By.29 percent 2.rise by 0.3 percent 3.Fall by .29 percentarrow_forwardFor every 10 percent increase in price of health care services, demand falls by 3 percent. How much is the own price elasticity of demand for health care? 0.3 3.33 -3.33 -0.3arrow_forward
- What does income elasticity of demand mean for insurance companies and medical providers for making a decision?arrow_forwardDiscuss what is known about price elasticities of demand for various health care servicesarrow_forwardBriefly discuss the demand and supply factors that contribute to rising health costs. Specify how (a) asymmetric information, (b) fee-for-service payments, (c) defensive medicine, and (d) medical ethics might cause health care costs to risarrow_forward
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