Supply -Induced Demand The chart below depicts an individual's utilization of her regular physician's services, measured in number of visits. The downward- sloping purple line represents her demand for (i.e. marginal benefit of) office visits, the horizontal black line, at $130, is the market price of an office visit, the blue line, at $70, is the marginal cost the physician incurs for each visit, and the red line, at $40, is the per- visit copayment paid by the individual (she is insured). In addition, the green trapezoid, MB, represents the minimum benefit the physician must provide this individual (i.e. patient) in order to avoid losing her to an alternative provider. Suppose, instead, the increase in competition decreases the individual's information about alternative providers, so that MB decreases in size, filling the area between the demand curve and $ 40 up to 5 visits. Assuming the physician can induce demand, how many visits will the individual make?

Supply -Induced Demand The chart below depicts an individual's utilization of her regular physician's services, measured in number of visits. The downward- sloping purple line represents her demand for (i.e. marginal benefit of) office visits, the horizontal black line, at $130, is the market price of an office visit, the blue line, at $70, is the marginal cost the physician incurs for each visit, and the red line, at $40, is the per- visit copayment paid by the individual (she is insured). In addition, the green trapezoid, MB, represents the minimum benefit the physician must provide this individual (i.e. patient) in order to avoid losing her to an alternative provider. Suppose, instead, the increase in competition decreases the individual's information about alternative providers, so that MB decreases in size, filling the area between the demand curve and $ 40 up to 5 visits. Assuming the physician can induce demand, how many visits will the individual make?

EBK HEALTH ECONOMICS AND POLICY

7th Edition

ISBN:9781337668279

Author:Henderson

Publisher:Henderson

Chapter12: Medicare

Section: Chapter Questions

Problem 1QAP

See similar textbooks

Similar questions

Discuss the kind of pressure the Health Maintenance Organizations (HMO) exerted on the price of drugs.
What does price elasticity of demand mean for insurance companies and medical providers for making a decision?
Discuss what is known about price elasticities of demand for various health care services. Needs to discuss acute, chronic, well, dentistry; hospital, ambulatory
What does income elasticity of demand mean for insurance companies and medical providers for making a decision?
What are the equilibrium price and quantity of medical checkup?
How can healthcare systems address the inelastic demand for emergency care to prevent unchecked and exorbitant pricing for patients?
Discuss your views on the effect of price on the demand for urgent or non-urgent medical care. Justify how access to care may be related to the value of good health.
How would each of the following changes affect the demand curve for acupucture? 1) The surgeon general issues a warning that back surgery is ineffective. 2) Medicare stops covering back surgery.
Illustrate the trade-off between administrators and medical staff. Explain the economic principles involved in obtaining an optimal situation. How would this situation be affected by an increase in the pay of doctors and nurses?
What are the purpose of individual enterepreneur? What are the few advantage or merits of individual enterepreneur?
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?
Apply the concept of equilibrium in the health market or medicine practice