Consider the following information on Alfred’s demand for visits per year to his
ID: 1199050 • Letter: C
Question
Consider the following information on Alfred’s demand for visits per year to his health clinic, if his health insurance does not cover (100 percent coinsurance) clinic visits.
Price Quantity
5 9
10 9
15 9
20 8
25 7
30 6
35 5
40 4
a. Alfred has been paying $25 per visit. How many visits does he make per year? Find his demand curve.
b. What happens to his demand curve if the insurance company institutes a 40 percent coinsurance feature (Alfred pays 40 percent of the price of each visit)? What is his new equilibrium quantity?
Explanation / Answer
Ans a - Alfred makes 7 visits per year
Ans b - With coinsurance the price of $25 paid by Alfred initially will come down to $10 and the rest $15 will be paid b the insurance company. Virtually Alfred will pay only $10 for every visit hence the new quantity of visits are 9 per year.
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