Economics of Public Issues (20th Edition) (The Pearson Series in Economics)
20th Edition
ISBN: 9780134532035
Author: Miller
Publisher: PEARSON
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Question
Chapter 19, Problem 1DQ
To determine
The condition under which one tries to avoid purchasing health insurance.
Expert Solution & Answer
Explanation of Solution
There are many circumstances in which people avoid buying insurance. A few are mentioned below.
Social reason:
People are not aware of the features and the benefits of insurance. Hence, lack of awareness is the major reason behind people not opting for insurance.
Economical reason:
For every health insurance, there has to be a fixed premium that is paid by the people, either they get benefits in terms of reimbursement of treatment cost or not. The people are not in position to maintain such extra costs regularly because of their poor economical condition. So, they do not prefer to have health insurance.
Problem of adverse selection:
Insurance companies find it difficult to identify the people who need insurance the most. As a result, it charges an average amount from the people. Those who get ill rarely find the cost of the premium to be very high, so they avoid having such insurances.
Economics Concept Introduction
Introduction:
Insurance: Insurance refers to the contract between the person who is insured against the damages and the person who ensures to pay for the damages.
Adverse selection: It is the problem that arises due to imperfect information between the buyers and sellers. It leads to market failure. Consider an example of health insurance, where both needy and a normal person have to pay equal premium because the insurance companies fail to bifurcate the individuals in the market.
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technological progress (a), and the coefficient a. (You may assume the condition
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[5 marks]
(d) Show that at the Golden Rule steady state the saving rate for this economy is
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[6 marks]
A firm faces the following production function,
Y = AKα L¹-a
(1)
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MPK = r +8
(2)
Where MPK is the marginal productivity of capital, r is the real interest rate, and ♪ is
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[3 marks]
(b) Referring to your result from part (a), comment on what happens to K* when
each of the following variables change (holding other variables constant),
(i)
The measure of technology (A) falls
(ii)
The depreciation rate (8) increases
(iii)
The real interest rate (r) increases
[2 marks]
[2 marks]
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Chapter 19 Solutions
Economics of Public Issues (20th Edition) (The Pearson Series in Economics)
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