Designers of National Health Insurance proposals have been greatly concerned with a number of questions. What would happen to the quantity of various services demanded if prices to patients were cut to zero or were cut 75 percent? Knowledge of elasticities is crucial to answering these questions. In a recent study of the demand for dental care, Manning and Phelps estimated price elasticities separately for adult females, adult males, and children. Their results were as follows: a. b. C. Service Cleanings Fillings Extractions Examinations Dentures Crowns Orthodontia Adult Females .79 .58 -.21 .56 .59 -.54 -3 Adult Males .14 .73 1.51 .03 -2.20 -.89 Children 1.34 ..95 .97 .59 1.70 .08 Source: W.G. Manning, Jr. and C.E. Phelps, "The Demand for Dental Care," The Bell Journal of Economics, Autumn 1979, pp. 503-525. If prices to all patients were cut, would expenditure on examinations rise or fall? Why? {Note: Negative entries in the table refer to Giffen goods.} For which service would a reduction in price to children have the smallest effect on expenditure? For which service would a reduction in price to children result in the smallest percentage change in quantity demanded? {Hint: Here and in part (b), exclude dentures.}

Designers of National Health Insurance proposals have been greatly concerned with a number of questions. What would happen to the quantity of various services demanded if prices to patients were cut to zero or were cut 75 percent? Knowledge of elasticities is crucial to answering these questions. In a recent study of the demand for dental care, Manning and Phelps estimated price elasticities separately for adult females, adult males, and children. Their results were as follows: a. b. C. Service Cleanings Fillings Extractions Examinations Dentures Crowns Orthodontia Adult Females .79 .58 -.21 .56 .59 -.54 -3 Adult Males .14 .73 1.51 .03 -2.20 -.89 Children 1.34 ..95 .97 .59 1.70 .08 Source: W.G. Manning, Jr. and C.E. Phelps, "The Demand for Dental Care," The Bell Journal of Economics, Autumn 1979, pp. 503-525. If prices to all patients were cut, would expenditure on examinations rise or fall? Why? {Note: Negative entries in the table refer to Giffen goods.} For which service would a reduction in price to children have the smallest effect on expenditure? For which service would a reduction in price to children result in the smallest percentage change in quantity demanded? {Hint: Here and in part (b), exclude dentures.}

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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