Student full name:____________
Homework 5
Problems from the textbook
Chapter 6
: 1, 3 (page 185). In question 3, you do not have to answer 3D.
Problems not from the textbook
1) Suppose that the market demand and market supply for medical care are represented by the functions:
P = 600 – 2QD
P = 15 + 3Qs
a) Draw the demand and supply curves based on the equations given above. (P on the vertical axis and Q on the horizontal axis). Do not forget to include the value of the intercepts on the vertical and horizontal axes. Make sure to label the axes and the curves.
b) Find the equilibrium price (P*) and the equilibrium quantity (Q*). Also, show the market equilibrium on the graph you drew in part a). Label this point “A”. SHOW ALL YOUR WORK.
c) Suppose that a health insurance with a 50 percent coinsurance rate is made available. Calculate the new equilibrium price and quantity.
d) Show on the graph you drew in part a) the new market equilibrium. Label this point “B”.
e) Show graphically the deadweight loss due to this insurance. Also, calculate the corresponding deadweight loss.