What is the arc price elasticity of demand

Reference no: EM132228473

Health Economics Questions -

A. True/False Explain. Indicate whether each of the following statements is true or false and then explain why you think this. Include in your explanation any pertinent institutional details and economic reasoning (including appropriate graphs and equations). Please provide concise, clear answers with minimal irrelevant detail. Explanation is required.

1. Suppose you are interested in estimating the elasticity of demand for medical care. A good way to do this would be to compare the quantity demanded by people with insurance to the quantity demanded by people who chose not to buy insurance, and estimate how quantity responds to the reduction in prices caused by insurance coverage.

2. In Figure 1 below, an individual with high levels of education has marginal efficiency of investment given by MECH. The marginal efficiency of investment for an individual with low levels of education is given by MECC.

3. In the Grossman model, the optimal choice of health status decreases as people get older.

4. According to the model of rational addiction, an increase in taxes on addictive goods is likely to reduce the number of non-addicted consumers who try the addictive good for the first time.

B. Analytical Problems: Please show all calculations for full credit.

5. Suppose you are collecting data from a country like Japan where the government sets the price of health care. Each prefecture in Japan has a different set of prices. Data from 1999 are displayed in the following table:

Region	Outpatient Visits	Price per Visit
Tokyo	1 per month	25 Yen
Hokkaido	2 per month	15 Yen

1. What is the arc price elasticity of demand for health care in Japan based on these data?

2. Suppose that incomes are generally much higher in Tokyo than in Hokkaido. Is the correct demand function more elastic or more inelastic than your answer to the previous question? Justify your answer.

3. Using your estimated elasticity from part a, what would the demand for health care be if the price in Tokyo were raised to 30 Yen per visit?

4. Using your estimated elasticity from part a, what would the demand in Hokkaido be if the price were lowered to 5 Yen per visit?

6. California decides to introduce a tax on the sale of marijuana. Assume the elasticity of demand is -0.5, and that supply is perfectly elastic.

a) If the tax increases the price of marijuana by 100%, what will happen to the amount that is sold?

b) Suppose marijuana is addictive, and that consumers who choose to buy it are rational addicts. Explain what the theory of rational addition predicts will happen to the quantity sold today if the tax increase begins next year. (Note: the theory of rational addiction says nothing about stockpiling goods to avoid paying taxes, so that is not the answer I am looking for.)

c) Suppose there is a legal market with perfectly elastic supply that pays the tax, and a secondary black market that evades the tax. The elasticity of supply in the black market is 1 (the number doesn't matter, just assume that it's neither perfectly elastic nor perfectly inelastic), and assume that after the tax it's cheaper to buy from the black market at low market quantities. Draw an example of what the market supply curve would look like. (Hint: the market supply curve represents the lowest price at which you could buy a given quantity of a good.) Now suppose the state is short on money so they raise the tax rate. Show using a supply- demand diagram what will happen to total tax revenue.

Reference no: EM132228473

Questions Cloud

How often does the texas legislature meet : How often does the Texas Legislature meet? How many are in the Senate?

Defined by the project management institute : You have learned about the 10 project management knowledge areas and the five project management process groups as defined by the Project Management Institute.

Declare a string variable named num : Declare a String variable named num and assign it the value of 9. Don't forget the semi-colon (;) at the end of your statement.

What is the boolean expression for an or gate : What is the Boolean expression for an OR gate? What is the Boolean expression for an AND gate? What is the Boolean expression for a NOR gate?

What is the arc price elasticity of demand : Analytical Problems: Suppose you are collecting data from a country. What is the arc price elasticity of demand for health care in Japan based on these data

What ttl and cmos technologies are : What TTL and CMOS technologies are. What are the differences between them in terms of performance?

Essay about your experience on why incentives matter : Write an essay about your experience on why incentives and cost benefit matter. 1-2 page paper

Implementation of different types of strategy : ‘Different organizational implementation tools should be designed in order to facilitate the implementation of different types of strategy’.

Summarize the components of the health care bill : Select a current health care bill that addresses one or more of the components of healthcare. You will use three to five academic sources to write this paper.

User Account

All Pages