Discuss impact on demand for services

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Review some of the factors that influence the price of healthcare insurance and discuss the impact on demand for services. Suppose a person is considering the purchase of a health insurance policy with a premium of $4,000 per year. For simplicity, assume that it covers all costs (i.e. there are no patient cost-sharing requirements). Further, assume that she/he does not have any coverage options from her/his employer or spouse. After conducting some research, he finds that a person of his age and health status spends, on average, $3,500 on healthcare services. Explain why such a purchase might be economically rational. Can you think of an instance where it might not be rational for her/him to purchase the coverage?

Reference no: EM133248476

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