The following graph shows the supply of and demand for doctor visits in a small economy. Assume that there are no externalities from the production or consumption of doctor visits. The supply curve shows the number of doctor visits supplied at each price, where the price per visit is the amount received by doctors for their services. That is, the supply curve represents the marginal cost of producing additional doctor visits. The demand curve shows the number of doctor visits demanded by patients at each price, where the price per visit is the amount that patients have to pay themselves. That is, the demand curve represents the marginal benefit of consuming additional doctor visits. Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. DOLLARS PER VISIT 180 150 120 90 30 0 0 100 Market for Doctor Visits Supply Demand 200 300 DOCTOR VISITS PER YEAR 400 500 600 Graph Input Tool Doctor Visits per Year Patient Payment (Dollars per visit) Insurance Payment (Dollars per visit) 200 120 0 Price Doctors Charge (Dollars per visit) 60 The equilibrium number of doctor visits in this economy is 200 visits per year, while the equilibrium price is $60 per visit. Now, suppose everyone in this economy gets health insurance that pays 80% of the price received by doctors. In this case, there would be doctor visits demanded per year. (Hint: Type each entry in the drop-down menu into the white box, and examine the result. When you change the number of doctor visits in the white box, the value in the insurance payment box changes to reflect the amount that would make up the difference between what patients are willing to pay and what doctors charge at a given quantity. )

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Uncertain what the last question for step 1 is, options are 200, 300, 400, or 500 Uncertain what the adjustment for the graph is for the second step and uncertain what the correct answers are

Step 1: Market for Doctor Visits
The following graph shows the supply of and demand for doctor visits in a small economy.
Assume that there are no externalities from the production or consumption of doctor visits.
The supply curve shows the number of doctor visits supplied at each price, where the price per
visit is the amount received by doctors for their services. That is, the supply curve represents
the marginal cost of producing additional doctor visits.
The demand curve shows the number of doctor visits demanded by patients at each price,
where the price per visit is the amount that patients have to pay themselves. That is, the
demand curve represents the marginal benefit of consuming additional doctor visits.
Use the graph input tool to help you answer the following questions. You will not be graded on
any changes you make to this graph.
Note: Once you enter a value in a white field, the graph and any corresponding amounts in
each grey field will change accordingly.
DOLLARS PER VISIT
180
150
120
60
30
0
Market for Doctor Visits
Supply
Demand
100 200 300 400
DOCTOR VISITS PER YEAR
500
600
Graph Input Tool
Doctor
Visits per
Year
Patient
Payment
(Dollars per
visit)
Insurance
Payment
(Dollars per
visit)
The equilibrium number of doctor visits in this economy is 200
equilibrium price is $60 Y per visit.
200
120
0
Price
Doctors
Charge
(Dollars per
visit)
60
visits per year, while the
Now, suppose everyone in this economy gets health insurance that pays 80% of the price
received by doctors. In this case, there would be doctor visits demanded per year. (Hint:
Type each entry in the drop-down menu into the white box, and examine the result. When you
change the number of doctor visits in the white box, the value in the insurance payment box
changes to reflect the amount that would make up the difference between what patients are
willing to pay and what doctors charge at a given quantity. )

changes to reflect the amount that would make up the difference between what pal
willing to pay and what doctors charge at a given quantity. )
Step 2: Market for X-Rays
The following graph shows the supply of and demand for x-rays in the economy.
Adjust the following graph to show the effect of the introduction of the health insurance plan
on the market of x-rays.
Tool tip: Click and drag one or both of the curves. Curves will snap into position, so if you try
to move the curve and it snaps back to its original position, just try again and drag it a little
farther.
PRICE OF X-RAYS
Market for X-Rays
Supply
QUANTITY OF X-RAYS
Demand
Demand
M
Supply
(?)
Which of the following is a consequence of the introduction of the health insurance
plan? Check all that apply.
The demand for doctor visits increases.
The total medical costs in the economy decrease.
The equilibrium price of x-rays rises, other things held constant.
The equilibrium quantity of x-rays rises, other things held constant.

Expert Solution

Step 1

Microeconomics is built on the notions of demand and supply. Effective demand is just the total amount purchased by various households at various price levels, whereas supply is the total amount of output offered by producers at various price levels. Demand and supply each have their own set of determinants, or factors that determine the corresponding levels of demand and supply.

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